China Warehouse- More Than Crockery Message Board

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Strategies & Market Trends : China Warehouse- More Than Crockery

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To: RealMuLan who wrote (1777)	12/7/2003 11:07:18 PM
From: RealMuLan	Read Replies (1) of 6370

They must be dreaming<g> -- Japan wants yen to be the anchor of Asia Larry Elliott in Tokyo Monday December 8, 2003 The Guardian Plans for the yen to become the anchor in a new Asian currency area are being floated by Japan as Tokyo challenges China for leadership of the world's [AD] ADVERTISEMENT most dynamic economic zone. Taking its inspiration from the central role played by the German mark in Europe's exchange rate mechanism, Japan is urging other countries in east and south-east Asia to yoke their currencies together as part of a drive for closer integration and even faster growth. The move comes as Japan's ministry of finance signalled a willingness to continue intervening aggressively on the foreign exchange markets to hold down the yen, but is part of a longer term strategy designed to allow Asia to compete with the economic blocs in Europe and the Americas. Hiroshi Watanbe, director-general of the international bureau at the ministry of finance, said: "Japan is happy for other countries to link themselves to the yen. Since the currency crisis of 1997-8, the movement of Asian currencies has been affected by the yen as well as the dollar. Japan would be like the German mark the key currency in an Asian currency unit." Japan had no opposition to an Asian single currency. It was the possible culmination of a process lasting at least 25 to 30 years in which closer trade links, economic partnership agreements and an agreement to peg currencies would gradually bring the region's economies closer together. In the short-term, the ministry of finance is worried about the impact of a stronger yen on Japan's exports, but in the medium and long term its concerns focus on the threat posed by China to Japan's leadership role in the region. Mr Watanbe made it clear that the government would intervene again should the upward pressure on the Japanese currency persist. "The yen has stabilised between 108 and 110 to the dollar," he said. "At 109 it is over-valued. It should be at 125 to 130. Big companies have no real problems because they have global production, but the smaller companies do have problems. The market is not working in favour of a cheaper yen." He dismissed market rumours that the intervention in the currency markets was being "sterilised" by the authorities in an attempt to prevent too much liquidity building up in Japan's banking system. The senior official expressed some surprise that policy makers in the eurozone were not more troubled by the weakness of the dollar against the single currency, a trend which is making exports from Europe more expensive. Japan believes China should already be making plans for the flotation of the renminbi to prevent the development of a huge asset bubble. "Japan faced this situation in the late 1980s, and China is not as strong now as Japan was then. We don't want to see the knock-on effects [of a bursting bubble] on the smaller Asian countries. They would be placed in intensive care." Mr Watanbe said China should prepare for a more flexible currency regime by taking action on non-performing loans and by liberalising capital controls to allow money to flow out of the country. Tokyo's proposal is for China to float against a basket of currencies. guardian.co.uk

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