CNY devaluation taking its toll on the Japanese economy - Nomura

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 13, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Delhi) – Research Team at Nomura, suggests that a weakening of the Chinese yuan versus the US dollar is beneficial for Chinese companies' exports and has a negative impact on the exports of companies from other countries and regions that compete with Chinese companies.

    Key Quotes

    “For the Japanese economy, we think CNY depreciation will have negative ramifications for exports and inbound demand.

    That said, in many cases Japanese and Chinese companies' products appear to be well differentiated. We estimate that even in the extreme scenario of a 20% weakening of the yuan versus the US dollar the impact on Japanese GDP would be only around -0.3%.

    From a base level of USD/CNY of 6.5, a 20% weakening of the yuan would bring the rate to 8.1, which would mean a return to the level seen before China started gradually raising the value of the yuan in 2005. A move to USD/CNY of 7 would represent yuan weakening of around 7%, and would mean an even smaller impact on Japan's GDP. Although it is a question of degree, we expect yuan devaluation in itself to have only a limited impact on the Japanese economy.”
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