Research On Exchange Rate Driven Endogenous Progress Mechanism

China’s economy keeps growing in recent years, international trade surplus isexpanding and foreign exchange reserves continue to increase. In this backgroundRMB is faced with great appreciation pressure. Despite RMB appreciation hasappeared depreciation tendency since February this year, but the two-way exchangerate fluctuations is seen as the norm. There is still a modest RMB appreciation space inthe future.Because there are a lot of similarities between China’s and Japan’s economicdevelopment since1980s, more and more scholars concern that China will followJapan’s "lost decade" after "plaza accord". In this view, the impact of yen appreciationon Japanese trade and economy is worth studying, which has significance meaning forsolving RMB appreciation problem. Japan’s economic and trade data from1970to2011is selected, data analysis and empirical test method is used to inspect the short-term andlong-term effect of yen appreciation on Japan’s trade and economy after the "plazaaccord" in. The results show that:First, although yen appreciation has negative impact on Japan’s economic efficiencyin short-term, in the long run it plays an important role in increasing Japanese economicefficiency. From the technical level, this is the result of “exchange rate drivenendogenous progress mechanism”: the increasing exports cost forces Japanesegovernment to adjust trade structure, and make export enterprises to improve innovationability. The “exchange rate driven endogenous progress mechanism” is a long-termeffect, on one hand it hedge the risk of rising yen, on the other hand it can also offset thenegative effects of economic development, and even have positive effect on promotingeconomic efficiency.Second, the short-term effect of Japan’s real effective exchange rate on tradecompetitiveness is positive but long-term effect is negative. The short-term positiveeffect is in accordance with “J curve effect". However the long-term negative effect is worth studying. From the structural level, this is the result of Japanese economystructure adjustment: yen appreciation forces Japanese government to transformexport-led growth model, gradually get rid of excessive dependence on external demand,thus Japan’s trade competitiveness begins to fall.The empirical evidence from Japan has important reference value for solving RMBappreciation problem. The paper summarizes the experiences and lessons of yenappreciation after the "plaza accord", aims at exploring how to carry on the reform ofRMB exchange rate gradually, optimize “exchange rate driven endogenous progressmechanism”, and realize the economic growth pattern transformation in the long run.