Yen weakness is that many American policy makers, and some Japanese are worried about; most notably the 20th century the early 70’s and 80’s, the Japanese yen with the Government control, was artificially limited to low dollar exchange rate remained at 300 yen. As a result, the Japanese export industry machinery roar to lower prices to compete with U.S. industry; large Japanese investors bought U.S. debt, artificially low U.S. bond yields. As Murphy stated: “reason for the imbalance is twofold: first,” Reagan revolution “from the structure of the federal deficit will be embedded in the U.S. state system; the other is Japan’s national leverage, concentration of credit allocation and credit risk socialization characterized by the “developmental state” economic system.

Of course, now at least for Japan, the story has developed. Japanese government intervention in currency markets this week, too busy, too strong down the yen, the yen earlier this week surged to 1 U.S. dollar against 82.88 yen. Meanwhile, the U.S. commentators are no longer worried about Japan’s “unfair” export product or buy the bonds; the contrary, Japan has largely disappeared from America’s political vision.

However, if the “Japanese” Replace the word “China”, Murphy’s book will make readers feel strongly familiar. After all, to borrow the words of Murphy, now it is China’s main use of the low exchange rate and the “centralization of credit allocation,” to promote export industries, while large purchases of U.S. Treasury bonds. At the same time, U.S. politicians are now called for a substantial appreciation of the yuan, which is 1985, the Group of Seven (G7) to reach the revaluation of the yen, the “Plaza Accord” similar. This pressure will have an effect? At present, as my colleague Alan Beattie are reported to reach the Chinese-style “Plaza Accord” is unlikely. But as the dispute intensified the exchange rate, the book tells Murphy that time some of the lessons to be depth. Back in 1985, the yen exchange rate to improve the agreement just reached, many U.S. observers believe that a successful start, as the late 80s in the 20th century, the yen exchange rate of 1 dollar to 150 yen level, and The level of maintenance for several years.

Ironically, such “success” has not brought lasting stability. Instead, the purchasing power surge in the yen, Japanese financial institutions to continue large-scale purchase of foreign assets (including U.S. Treasury bonds). Meanwhile, the Bank of Japan cut interest rates to prevent the decline in exports, and stimulate more domestic demand. All this paved the road leading to crazy bubble, and then the bubble burst, the next few years appear more stable exchange rate. With Murphy as saying: “Change the unit of account did not address these fundamental (distortion) problem, but created a more unstable world.”

In view of these facts, now looking back at history, it is easy to produce the “Plaza Accord” is a bad idea to conclusion. Not a surprise that some of China’s policy makers also say precisely. But in fact, the whole story is more subtle. On Japan’s economic prosperity and recession and even broader instability, the biggest reason may be not only the “Plaza Accord” of the content and cause the situation, but during the decades prior to (or occurrence) of circumstances.

The key lies in Japanese “developmental state” system. The years after World War II, capital is extremely scarce, it seems reasonable to Japan through the centralization of credit allocation and capital controls, funds directed to the industry. However, the 20th century, mid 70s, the Japanese industrial rebound so fast, the country’s economic growth has reached a level that it no longer need this kind of bank-centered system, as children no longer need to grow up as an old shoe. In retrospect, it seems that Japan should abolish all kinds of control earlier, but in fact, Japan has resisted reform. So to the 20th century, 80’s, the Japanese economy has whole body full of distortions, the yen undervalued only one of them. This in turn has increased the difficulty of implementing any smooth adjustment.

Whether China can avoid these errors? China claims to be trying to avoid, after all, Beijing is implementing a financial reform program designed to help China’s financial system is slow “growth”, from the shackles of developmental mode. But given China’s growth rate, in my opinion, this release (as well as exchange rate adjustment) still looks slow pace of some danger. May now be “yen myth” translated into Chinese the right time, at least, it has convincingly made rapid appreciation and total rejection of reform, both approaches may result in risks.

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