I think there is every reason to believe that China's policy of pegging the Yuan has led in an indirect way to the strengthening of the Japanese Yen. This is causing a huge amount of turmoil among Japan's largest corporations. For example, this is a quote by the CEO of Hitachi:
"'Rapid changes should be managed by the government,' Hiroaki Nakanishi said at a news conference."
Osawa, Juro, 2010. Hitachi's president urges tokyo to take action on yen. The Wall Street Journal, Sept. 14.
It is unusual for Japanese business leaders to publicly criticize the government and perhaps even more unusual to suggest policy.
With this type of pressure, it appears that the Central Bank of Japan will need to begin open market operations to manage the value of the Yen.
With China and Japan both actively engaged in currency markets, and the US Congress conducting hearings on the Chinese policy of pegging, nothing good will result for the global economy. I think governments are afraid of imposing tariffs as many believe this practice accelerated the decline of the US economy during the Great Depression. However, in a way, currency manipulation is a less direct type of tariff, which in my opinion might be even more damaging.
An economic war of currency valuations is not in the best interests of the global economy.
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