First, the yens weakening vis-a-vis the euro or the dollar looks more like a reversion to mean than a currency attack with the value now reverting to 2010 levels after a sharp appreciation in the years before. From 100 yen to the dollar in January 2008, the yen appreciated all the way to 77.5 in January 2012 and is now back to 90. Two, given the role of monetary easing in getting back economies like the US on track, some of what looks like competitive devaluation was probably necessary.
But a reversion-to-mean and beggar-thy-neighbour, as China did in the run up to the east Asian crisis, are two different things. Indeed, a competing perspective on the US mortgage crisis is that it wasnt so much US consumers overspending that caused the problem as it was the oversupply of goods and capital from countries such as China that lowered interest rates artificially in the US. And, as Surjit Bhalla points out in his new book Devaluing to Prosperity, comparisons between China and Japan as currency manipulators mostly get it wrong. In the 15 years before the Plaza Accord of 1985, Japans current account surplus averaged 1% of GDP while Chinas averaged 2.4% in the 15 years to 2006 when it first began appreciating the yuanas a result, while Japans growth averaged 4% in this period, Chinas was 9.7%. While Plaza snuffed Japans growth by doubling the yens value in real terms in just 3 years, China refused to fall into the rapid exchange appreciation trap. That was good for China but probably hurt the world since it contributed to the great imbalances that led to the current crisisin the case of countries like India, this also cut into a good export market. Which is why, while saying talk of a currency war is premature, finance minister P Chidambaram has urged fellow Asian countries to avoid playing the depreciation game.