In the 40 years or so since the end of the Bretton Woods system, we have seen competitive devaluations occur again and again. However as SocGen notes, it appears Japan just keeps coming out on the losing side. Based on Real Effective Exchange Rates (REER), Japan's currency is 80% stronger now than in 1971 while the US (and South Korea interestingly) are about 40% weaker.
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The Euro has remained in a relatively stable band as the rest of the world has de- or re-valued itself. The 20% or so drop in the JPY so far under Abe's guidance appears a blip on the REER radar screen compared to its peers but, at the other end of the spectrum, SocGen suggests the USD is notably under-valued on a Purchasing Power Parity (PPP) basis - even as 'the strong dollar policy' remains verbally in tact.
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So with the G-7 and G-20 appearing to bless the currency war progression (happy to let Japan get a few hundred pips knowing very well that it was japan's FX sacrifice - facilitated by its historic current account and trade surplus, both since ended - in the past 40 years that allowed all other developed countries to crush their currencies with impunity on a relative basis), we suspect it will be Bernanke or Draghi that will need to act next - or their precious equity markets may just hit an FX-translated wall of worry.
Charts: SocGen