bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

sponsorType

urlAlias

moreOnThisArticles

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

Ben Westcott

Japan and China’s currency war appears to have been put on hold despite softening economic growth in the region, after the Bank of Japan kept monetary policy stable in the past month.
Tensions had been high since the Japanese yen plunged against the US dollar in November 2014, weaking from 105 yen to the dollar in October down to 121 yen by December.
Not to be outdone, the Chinese government startled markets in August 2015 when it suddenly devalued its currency 1.87 per cent against the US dollar.
Both moves were seen by analysts as a tactic by both countries to boost their flagging economies by using a weaker currency to stimulate exports
China’s economy dropped to seven per cent growth for the first time since the global financial crisis and Japan’s growth slipped into negative territory in 2014.
However rather than throwing another grenade into the currency conflict, in an announcement in the past month the Bank of Japan kept its monetary easing policy stable, avoiding further stimulus.
As a result, the yen rose slightly against the dollar and is expected to stay stable in the near future.
Gavekal Research analyst Joyce Poon said government and business leaders had lost their enthusiasm for additional currency devaluation, after previous efforts had failed to stoke growth.
“Japanese exporters chose to take advantage of the yen’s weakness to rebuild their profitability rather than to increase shipment volumes,” she said.
In fact, Poon said the currency devaluation may have instead damaged Japanese consumers by reducing their buying power.
“Additional yen weakness would further depress demand both at home and among Japan’s trading partners... which would eventually come back to haunt the Japanese economy,” she said.
When China decided to devalue its currency in August, the shock sent shares worldwide tumbling, including in the United States where the Dow Jones fell more than one per cent on the first day.
As the Asia region’s growth slowly decouples itself from the US dollar and begins to move closer to the yuan, any currency moves by China’s central bank become magnified.
“The [yuan]’s outlook remains pivotal for other Asian currencies,” JP Morgan analysts said in a recent email.
However the gamble may have paid off - in the short term the sudden drop in China’s yuan appears to have arrested the decline in the economy.
New economic data released on Thursday showed a soft but growing economic situation in the mainland.
JP Morgan analysts said while industrial production had come in weaker than expected at 5.6 per cent for October, retail sales rose 11 per cent in the past month and 10.9 per cent in September.
“We expect goods-producing activity to pick up moderately from November onwards,” they said.


China tightens gold trading rules in Shenzhen after platforms collapse

Africa’s yuan pivot: why more top lenders are eyeing China’s bond market

‘The Trump factor’: why China may benefit as investors diversify from US dollar assets

China lets yuan rise to strongest level in years as de-dollarisation trend grows

Yuan

Asia’s budding currency war pitting China and Japan on hold - for now

A customer holds a 100 Yuan note at a market in Beijing, in this August 12, 2015 file photo. China's policymakers think they can stem a rapid rundown of their foreign exchange reserves and ease pressure on the currency by pump-priming the economy to meet this year's growth target, sources involved in policy discussions said. Beijing will channel funds mainly into infrastructure projects, including railways, roads and airports, and the central bank will cut interest rates and bank reserve requirements, policy insiders say, reigniting fears of reverting to an old stimulus playbook at odds with an official drive to reform the economy. REUTERS/Jason Lee/Files

A customer holds 100 yuan notes at a market in Beijing as tit-for-tat currency depreciations with rival Japan seems to have slowed down for now. Photo: Reuters

.css-sioo19{color:#c79a00;}New | Asia’s budding currency war pitting China and Japan on hold - for now

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}

New | Asia’s budding currency war pitting China and Japan on hold - for now