The Domestic Economic Adjustments Under The Pressure Of Appreciation: Japan's Experience And Its Implications

Since the People's Bank of China announced that RMB exchange rate gave up observing closely US dollar exchange rate policy solely and started a management floating exchange rate system on July 21.2005, and took the market supply and demanded as the foundation and referred to a basket currency to adjust. Then, the RMB revaluation scope and how the Chinese government and enterprise take advantage of this opportunity to realize the enterprise as well as the state economy further develop become a topic. Talking about this question, nearly all scholars could mention the influence of Yen revaluation to Japanese economy after Square Agreement in 1980s.Through the combination of theoretical analysis and empirical test, the article uses econometric models to analysis the Yen revaluation effect and finally provide forward proposal.This thesis includes five chapters. In Chapter One(Introduction),the theoretical and practical significance of this subject is introduced, relevant studies from home and abroad are outlined, the main viewpoints and the author's creativity are given. The basic theories of this paper are based of the relationship among the float of exchange rate and international trade, exchange rate and FDI, exchange rate and bubble economy. Firstly, the float of exchange has a great impact to a country's international trade balance and the domestic economics. The currency revaluation will promote the decreasing of native products and then reduce the export and promotes the import; On the contrary, the currency devaluation will promote the native products and reduce the import, but the result needs a long time delay to be obviously. Secondly, as an important factor that influences the export enterprises, exchange rate is also an important factor to FDI, the traditional theory analyses the wealth and compared cost factors and takes the revaluation as a factor that promotes the FDI. Finally, the currency revaluation would reduce the price of import goods and promotes the export price, the relative change would promote the imports and reduce the exports. So revaluation will promote the native production and the reduce the employment, then the country will under the economic tightening, To avoid this situation, the government will use fiscal policy such as lower the interest rate to promote the domestic economy. But as the use of expansion fiscal policy, inflation pressure will appear and the credit inflation also exists.In Chapter two, the paper introduced the stages of Japanese Yen's revaluation and the Japanese government and Japanese enterprise's countermeasures. After the Japanese Yen's revaluation, the Japanese government took the expansionary fiscal policy to stimulate the economy. And the Japanese enterprise expanded the FDI, bought the foreign asset, the reconstruction of the inner enterprise to solver the problem of Japanese Yen's revaluation,also they use the financial market to avoid the influences.In Chapter three, the article analyses the situation after the Yen's revaluation. Firstly, the revaluation had a great impact to the Japanese's import in a short time, but the result is not obvious in the long run. Japanese's international trade change as the Japanese Yen's exchange rate change, and also the export product's structure and the trade partner; Secondly, the revaluation of Yen cause the hollowing out of Japanese's industry and promoted the adjustment and upgrade of the industrial structure. Thirdly, after the Agreement Japanese undergo the most serious bubble economy, some of the stock index were influenced and also the financial market and real estate market.Chapter four is the empirical model. The paper set the models about the Japanese Yen's exchange rate and Japanese's FDI, the land price index and the Nikkei 225 index respectively, Firstly the models and tests are set. By the methods of ADF test, co-integration test and error correction model, the basic model is set. Secondly, empirical test is done and results are obtained. The first step is ADF test. The result shows that the series are the integration. The second step is co-integration test. The test shows that the co-integration relationship among all the series exists. The third step is error correction model. The results indicate that the correction mechanism exists, but with different speeds.Chapter five is empirical test conclusions, analyses and suggestions. Above all, the revaluation had a great impact to the Japanese's import in a short time, but the result is not obvious in the long run. The reason is that the Japanese government and the enterprises'positive solutions. First, enhanced the industry direction and the adjustment, improve the products'value. Secondly, the relationship among Japanese'FDI, exchange rate and the GDP is balance in the long run, and the Yen's revaluation, the growth of GDP and the FDI is positive correlation. And it depends the transfer of the manufacturing to oversea. Finally, the influence of the interest rate to the Japanese economic is far more the influence caused by the Yen's revaluation. And the factor of interest rate can be concluded to the factor of Japanese's policy. So, we can conclude that the serious bubble economic is not caused by the Yen's revaluation. In the last part of the article, some proposals for China's countermeasures are given: firstly, the government should provide the protect policy to the export enterprises, enhanced the industry direction and the adjustment, improve the products'value. Secondly, the export enterprises should positively control the producing cost and accelerate the pace of technological innovation and the FDI. Besides, the export enterprises should also make completely use of the financial market and realize its maximum efficiency.