The irony in his statement was not lost on analysts, who pointed out that last week’s two successive daily yuan devaluations by the People’s Bank of China had resulted in only a 3 per cent drop in the yuan-dollar rate, while Japan’s own currency, the yen, has crashed 35 per cent in value over the past two years.
Fuck the Japs.
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Japan warns China against frequent yuan devaluations to prop up economy
Anthony Rowley
22 August 2015
As Asian stock prices slumped Friday on the back of news that factory activity in China had fallen to its lowest level in more than five years, Japan Minister of Finance Taro Aso has warned the Chinese authorities against resorting to frequent devaluations of the yuan to prop up the country’s sagging economy.
Mr Aso, who is also deputy prime minister, said after a regular Cabinet meeting: “Japan will face a tough decision on how to respond if China intervenes frequently in the market.”
He was reported to have said that Japan welcomed China’s move last week to change the basis on which the daily exchange rate of the yuan is fixed, provided that it is a part of Beijing’s efforts to make its currency system a market-based one.
However, he warned that Japan was on guard against any attempts by China to manipulate the yuan to give its exports a competitive advantage.
The irony in his statement was not lost on analysts, who pointed out that last week’s two successive daily yuan devaluations by the People’s Bank of China had resulted in only a 3 per cent drop in the yuan-dollar rate, while Japan’s own currency, the yen, has crashed 35 per cent in value over the past two years.
A prominent investment banker who declined to be named suggested to The Business Times that Mr Aso’s remarks amounted to a case of “the pot calling kettle black”.
Meanwhile, markets on Friday appeared more concerned about the slump in China’s factory activity than by fears of significant further yuan devaluations, which the Chinese authorities have said they will avoid.
Reuters reported that the Caixin/Markit manufacturing index showed that activity in China’s factory sector shrank at its fastest pace in almost 61/2 years in August, as domestic and export demand dwindled.
Coming on the heels of weaker-than-expected Chinese economic data in July, the drop stoked fears of a slowdown in the world’s second-largest economy.
Herald Van Der Linde, head of Asian equity strategy at HSBC, was quoted as saying: “Markets are pricing in the worst right now.”
Tokyo’s Nikkei 225 stock average slumped by nearly 3 per cent or 597.69 points on Friday to 19,435.83 - its lowest level in three months; other Asian markets also slid.
The MSCI (Morgan Stanley Capital International) index of Asia-Pacific shares outside Japan fell by 2.4 per cent to its lowest since July 27, 2012, for a weekly loss of 6.1 per cent, Reuters reported.
Meanwhile, Shanghai stocks dropped by 4 per cent to below their 200-day moving average for the first time since July 2014, taking losses for the week to 11 per cent.
Reuters reported that Hong Kong’s Hang Seng index fell 2.4 per cent, making a weekly loss of 7.4 per cent.
Japan’s economy has hit another weak patch, with gross domestic product (GDP) contracting at an annual rate of 1.6 per cent in the second quarter of 2015 from the preceding quarter.
The drop reflected stagnant domestic demand and weak exports in the second quarter, but some analysts say the Japanese authorities may seek to play up the impact of China’s slowdown rather than cite domestic factors as being behind Japan’s economic weakness.
Meanwhile, some commentators are blaming China’s yuan devaluation for the sharp and continuing slides in Asian and other emerging market currencies.
But the Institute of International Finance in Washington reports that the slide in emerging market currencies and an accompanying slide in emerging market stock prices began well before China’s move to devalue the yuan, and reflects capital flow in anticipation of an early rise in US interest rates.
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