Japan Stock Market

Next month will be the 20th anniversary of the peak in the Japanese stock market. Chinese officials attribute Japanese capitulation to the relentless US demands for currency appreciation as a contributing factor to the poor performance over the past two decades and do not want to be caught in the same trap. Consider that in early 2005, notable economists were claiming that the yuan was 20-25% under-valued and that such a currency adjustment would be necessary to bring the bilateral trade into balance. Beginning in July of that year, China allowed its currency to appreciate 20-25% over the next three years and by the end of the period the Chinese trade surplus had doubled. At the start of this year, some of the same economists were calling for another 20-25% appreciation.