MonitorCurrency warmongering as out of place as the real thing
China's anger at the depreciating yen is misplaced, with the sharp fall unlikely to make Japanese exports much cheaper than Chinese ones
As if all the television footage of warships, bomber planes and battle tanks weren't bad enough, Chinese officials have recently raised the volume of talk about a currency war with Japan.
Last week People's Bank of China deputy governor Yi Gang declared that the central bank is fully prepared for an outbreak of hostilities. This week the former economics tutor of incoming premier Li Keqiang said "China doesn't approve of some countries' overly accommodative monetary policy."
Then, in an interview with The Wall Street Journal, the head of Beijing's US$482 billion sovereign wealth fund went a step further, warning Japan against "treating the neighbours as your garbage bin and starting a currency war".
What's got their goat is the 13 per cent fall in the Japanese yen against the yuan in the three months since it became clear that Shinzo Abe would win Japan's December election and institute more stimulative policies (see the first chart).
Last month the Bank of Japan adopted an explicit inflation target. Now Chinese officials fear that incoming BOJ chief Haruhiko Kuroda will step up the central bank's programme of quantitative easing to weaken the yen further in an attempt to shake off the crippling deflation that has hobbled Japan's economy for the last 15 years.