FXStreet (Delhi) – Research Team at Nomura, suggests that the economic impact of yuan devaluation per se is likely to be limited. Key Quotes “While the devaluation of the Chinese yuan is a positive for the Chinese economy, even after taking into account the issue of its foreign currency-denominated debt, it is a negative for other Asian economies, and it is likely to have a negative impact on the Japanese economy via a decrease in exports and inbound demand. However, even if the yuan were to weaken beyond USD/CNY of 8, we estimate an impact on Japanese GDP of only around -0.3%, and although it is a question of degree we think the impact of yuan devaluation on the Japanese economy is likely to be limited. To take a completely different view, it might be appropriate to view the increase in risk-off behavior seen to date as being due not to yuan devaluation in itself but to concerns about a slowdown in the Chinese economy that this devaluation might indicate. We estimate that if Chinese GDP growth were 3ppt lower than projected for one year, this would depress Japanese GDP growth by 1ppt or more. It can be argued that Chinese economic growth has already corrected to a considerable extent, and it is quite possible, in terms of both financial wherewithal and intent, that the Chinese government will decide to support economic growth aggressively. The increase in risk-off behavior since the beginning of this year looks a little overdone, in our view.” For more information, read our latest forex news.