Over the weekend, we noted that the US Treasury put the Bank of Japan on notice regarding its newly announced quantitative easing program, warning it not to artificially depress the yen in order to gain a trade advantage. We went on to speculate that the Chinese would complain even more loudly given the heightened tensions between the two countries.
Well, for now anyway, the Chinese appear to be holding their fire. Jin Liqun, chairman of the supervisory board at China’s sovereign wealth fund, seemed to pull back from the kind of heated rhetoric Chinese authorities have thrown at money-printing central bankers in the past. The Financial Times quotes him:
“Monetary easing might be helpful but the role is very much limited,” Mr Jin said. “It is a necessary but not sufficient condition.”
Contrasted with previous officials’ statements, which described US quantitative easing as “crazy money printing” among other things, this is certainly a more measured response. And given the ongoing tensions between Japan and China, the restraint is notable. Nevertheless, it fell short of an actual endorsement, and certainly left the door open to China taking a harder line in the future.
These are unprecedented monetary moves in a particularly difficult time for the world, and China’s wait-and-see attitude in this case reflects this uncertainty. After all, in normal times China would have much to lose in the face of a plummeting yen.
[Yen photo courtesy of Shutterstock]