Will the Monetary Policy of the Bank of Japan Lead to a Currency War?

Is the loose monetary policy of the Japanese central bank setting off a competitive devaluation? Jürgen Matthes, Institute of the German Economy in Cologne, argues that at present there is no real currency war, but that there are some signs of a possible worsening of the situation. In addition, the euro could come under pressure to appreciate in the medium term, which would pose a great problem for the European Central Bank. Horst Löchel, Frankfurt School of Finance & Management, argues that from the perspective of the developed economies, Japan is not conducting a currency war, because the Fed and the ECB have also been flooding the markets with cheap money in reaction to the crisis. From the perspective of emerging economies, however, Japanese monetary policy is seen differently. For these countries, this course of Japanese monetary policy means that more capital will flow into their countries, which presents the danger of the formation of asset bubbles, a credit glut, rising inflation and rising exchange rates. Uwe Vollmer, University of Leipzig, considers the term “currency war” an exaggeration. Unlike other countries, Japan has been keeping to the international rules, has not resorted to the imposition of capital controls and also pursues no explicit exchange rate target. Finally, Oliver Landmann, University of Freiburg, considers the “spectre of a looming currency war” to be a “myth”.