CIC On The Devaluating Yen
Japan has been experiencing high levels of deflation, and in order to combat this issue they have been lowering the value of their currency in hopes that the demand for their products would rise, driving their economy back up. This may seem to only apply to Japan, but this largely affects other countries, especially China. With the devaluing of the Japanese Yen, their products are now cheaper, which fights with prices of products produced in China and other countries and decreases their demand. Not only is this negatively affecting the manufacturing aspect of China, but its investments as well. The CIC (Chinese Investment Corporation) holds large sums of different currencies, some being the yen. If Japan continues to devalue the yen then the money that the CIC is holding will decreases in value. As the value of the yen decreases, investors are less willing to buy Japanese securities and instead buy securities from countries like China, which would raise the value of their currency and make the demands for the products even lower.
Though Japan is acting upon these policies to try to drive their economy back up, these policies will have a large negative impact on other nations such as China. As the demand for Japanese products increase, Japan will begin to supply more, but they are limited in how much they can supply, and major inflation will occur. This policy will have a negative affect on the global economy, so Japan should refrain from devaluing their currency.
Written by: Jessica Ho
Source: The Wall Street Journal
Wei, LingLing. (2013) CIC President Warns Japan on Yen Devaluation. The Wall Street Journal. Retrieved from http://online.wsj.com/article/SB10001424127887324034804578343913944378132.html?mod=WSJ_hps_LEFTTopStories