If the yen and yuan fall?

"Japan had a stellar 2017," wrote W Pesek. "But could the world's third biggest economy be a source of global chaos in the year ahead?" Dutch-base Saxo Bank predicted, "As inflation rises yields, too, will spike, and the result will be a fantastical plunge in the yen." They predict that "the yen hits 150 to the dollar (from 113 now)". Why? The Bank of Japan cut interest rate to minus 0.1% in January 2016 in an effort to increase inflation rate to its target of 2%. At its last meeting in December 2017 the Bank decided to continue with the interest rate of minus 0.1% because prices rose by just 0.8% in October, well below its target. Its economy is expected to grow by 2.5% in the last quarter. The Bank of Japan will also continue with its asset purchase program, known as quantitative easing. These measures have naturally created "bubbles in bond and stock markets". Analysts think that the Bank of Japan will lose control of the economy as inflation spikes and the yen drops. A weaker yen will be great for exports but may anger President Donald Trump who is "already miffed that Japanese Prime Minister Shinzo Abe, his closest ally, voted for a United Nations rebuke of Trump recognizing Jerusalem as Israel's capital". But the greatest danger is to China. "The weaker the yen gets, the greater the risks of a Chinese yuan devaluation," said J Koll. He fears a 30% devaluation of the Chinese yuan if the yen drops below 140 to the dollar. A collapse of the Chinese economy is great news for India, but a fall in the value of currencies of Japan and China will result in a tide of imports which will decimate our manufacturing. Share of manufacturing has not increased from around 16% of the GDP even after economic reforms. Rapid increase in exports based on low cost manufacturing, which brought so much wealth to East Asian economies, is no longer possible, wrote Prof D Rodrik. If these currencies fall then so will the Indian rupee. The rupee is trading below 64 to the dollar which is keeping prices under control by reducing prices of imports. The economy was growing strongly as inflation was kept in check by low international price of crude oil but this is creeping up towards $70 a barrel. High inflation may lead to tightening by the Reserve Bank which will make loans more expensive and deter new projects. If the government cuts taxes to check fuel prices from rising its revenue will fall and deficit will increase. India is predicted to become the fifth largest economy by 2018, overtaking the UK and France, but we should not celebrate too early because of the many pitfalls that lie ahead, wrote, VANageswaran. General elections in 2019. Enough time for stuff to hit the fan.