The yen's exchange value is considered likely to top the rate of ¥79.75 to the dollar registered in 1995 for an all-time high sooner or later. At a meeting that ended Oct. 23, Group of 20 finance ministers and central bank governors managed to contain the confrontation between the advanced economies led by the United States and the major emerging economies including China, and agreed for now to avert a global competition of currency devaluation.
But the exchange markets are accelerating the trend of flight from the dollar due to concerns about U.S. employment uncertainty and credit crunch. And the Federal Reserve Board has stepped up its credit-easing measures, adding further momentum to the dollar's decline. In addition, the Democratic Party's heavy losses in the midterm election reflect the American people's distrust of the party and President Barack Obama. Consequently, confidence in the U.S. economy is being seriously shaken.
Meanwhile, China flatly refuses to appreciate its currency despite U.S. pressure apparently because of its fears that the renminbi's appreciation might cause its economy to fall into a slump, which could trigger social unrest. It is not surprising that the U.S. government, anxious to double its exports as a strong lever to achieve national economic recovery, is strongly dissatisfied with the attitude of the Chinese government.