Japan's experience, from the yen's revaluation to the collapse of its bubble economy, leaves deep lessons for other countries.
The first lesson is that a country should discreetly calculate chances, scope and affordability when deciding on a revaluation of its currency.
For a long time into the future, the US dollar will remain the main currency for foreign exchange reserves, trade settlements and circulation. Thus, only the United States can afford, in accordance with its domestic demands, to adjust the US dollar's exchange rate.
The outbreak of an economic crisis in Mexico and Southeast Asia demonstrates that developing countries, without strong economic and financial strength and the capacity to handle financial fluctuations, should be prudent in making decisions concerning appreciating or devaluing their currencies. Otherwise, serious consequences may occur.
The second lesson is that a country should take measures to prevent major foreign trade and investment risks.
Japan's substantial trade surplus with the United States since 1964, which stood at US$60.99 billion in 2002, has prompted the United States to adopt various ways to exert pressure upon Japan to appreciate the yen.
The purchase craze Japan started overseas in the late 1980s left a great risk for the country's economy.
At that time, Japan began all-out investment overseas. When its transnational companies began a mass retreat from overseas markets in the 1990s, heavy losses ensued.
It is said that Japan lost its trade surplus over the United States after its bubble economy collapsed.
