| Now the world economy is coming to a new critical juncture where the three big economies, including Japan, the US and the EU, have stumbled into an unprecedented stagnancy. A "Growing Depression" demonstrated its momentum in the world economy and probably it may linger into the year 2002. Argentina and Turkey have fallen down, resulting in domestic economic crisis and social unrest. A new round of international financial turmoil is brewing. Some economists are even pessimistic to the point as suggesting we review the "Economics of Recession" of the 1930s. Of the three big economies, Japan suffers most and has attracted the eyeballs from all over the world, Asian countries in particular. Japanese Yen is a fairly important primary currency, and its importance should never be underestimated. The trend of Yen's exchange rate plays a significant role to the world economy, especially to the regional economy in Asia. Therefore, the enormous and sustained depreciation of Yen's exchange rate since 2001 became the focus of the world economy.In view of the above understanding, this paper carried out an in-depth analysis of the persisting depreciation of Japanese Yen by discussing the status quo of Japan's economy and its policy reform, and further more, unveiled its impact on Japan's economy and the world economy at large. This paper made a special effort to expound the influence of Yen's depreciation on China's economy, trade and financial sector, hoping to explore worthy and valuable experience and inspiration there from so as to step up the rapid, healthy and smooth development of China's economy. This paper is composed of five chapters. The first summarizes the trend of Yen's exchange rate; the second analyzes the origin of the trend; the third discusses the influence of Yen's depreciation on Japan's economy; the fourth examines the effect of Yen's depreciation on other countries; the last but not the least, takes a look at the consequence the Yen's depreciation brought about to China's economy.The first chapter briefly introduces the monetary system and economic development of Japan, reviews the history of Yen's exchange rate since the country implemented the floating exchange rate system since 1973. Emphasis is given to the general trend and characteristics of Yen's exchange rate after 2001, presenting the trend of the current depreciation of Yen's exchange rate. The second chapter analyzes the current situation of Japan's economy, its exchange rate policy orientation and the international economic factors, probing to find the reason of depreciation. Firstly, based on existing economic statistics, the paper points out the three key problems of Japan's economy, i.e. mountainous bad creditor's rights in the bank, the state financial troubles and its unsound financial structure. In-depth study is made on the inner cause of the economic recession, and the root cause of the depreciation of Yen's exchange rate is brought to light, that is, Japan's domestic economic problems. Secondly, the paper explains theoretically the important role of a country's exchange rate policy for achieving its economic objectives both internally and externally. Key analysis is made on Japan's existing monetary policy and exchange rate orientation, while much ink is applied to the transmitting system by which the Japan economic reform policy affects the Yen's exchange rate. Also under discussion is the effect upon Yen's exchange rate caused by the two major propositions for Japan's economic reform, namely, the expanding monetary policy that unravels the problem from the demand prospective and the structural reform policy that solves the problem from the supply prospective. In the end, the analysis of the current exchange rate policy suggests that Japan's exchange rate is the accelerator and catalyst of Yen's sustained depreciation. Thirdly, by analyzing the economic factors of the US and EU, the paper discusses the international background of Japan's implementation of a weak exchange rate policy and the influence of curre... |
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