World economic giants have been briefly printing more currencies day-after-day just for the sake of ‘economic recovery’. Be it the largest economy of the world, the U.S., single currency bloc, Euro zone or the land of rising sun, Japan. All of these major economies are severely exercising stimulus packages citing economic degradation. The U.S., on the one end, via the monetary package-Quantitative Easing-3 (QE-3), has been spurring the liquidity into the market in the form of bonds and treasuries buy backs, Japan, from the other end, has set an inflation target of 2 percent to be attained by two years time and already started extensive monetary stimulus package to stimulate the economy. These policies might be generally perceived as a common economic phenomenon, the scenes behind the curtain might be quite surprising and ‘un-thought’ by many.    

Japan and the U.S., being the major reciprocal trading partners, command and influence many economic sectors of the corresponding nations. Under such critical trade scenario, where a slight economic reform by the other nation affects the trading scenario of another nation, monetary and fiscal policies and re-structuring are considered to be of a great importance. As the U.S. has been constantly exercising QE-3 to pull-back the unemployment rate at a comfortable position, obviously keeping track of the inflation rate, the greenback has been kept at a lower index. Similarly, as the third round of the U.S. stimulus had been deteriorating Japanese trade with the U.S., Japan, with the commencement of stimulus regime lately, has finally developed Yen as an export-friendly currency.

In spite of both the nations, i.e., the U.S. and Japan, have been going through expansionary economic measures, if scrutinized scrupulously, these regimes could exhibit an outlook of a severe currency war between these core global economies. The rationale is fairly simple, make the export cheaper and import dearer. As every story has two faces, the ongoing monetary measures in different economies around the world by far by-passes the variables like unemployment, inflation, interest rate et cetera, but maneuver Balance of Trade positions.

For the time being, the most likely economic reforms, as sought, could be supportive or expansionary monetary and fiscal policies by Chinese economy, obviously, to improve, expand, and create economic multiplier-effect in the domestic economy! Time will only tell how these economies shall accommodate their monetary policies and reforms considering the cross-currency valuation and trading regimes.