There are some eerie parallels between the mid-1990s and today in the macroeconomic sphere in Asia. However, a crisis similar to the one in 1997 is not probable.
In the mid-1990s, the Renminbi and Yen devalued while rising US interest rates led to a strong US dollar. These, together with the withdrawal of capital from Asia, the erosion of export competitiveness (since Asian currencies were pegged to the US dollar) and “crony capitalism” aided by foreign currency borrowings, culminated in the 1997 Asian Financial Crisis.
What should worry us is that there are similarities in the financial situation today: 1) the Yen devalued by 30% against the US dollar in the last 10 months; 2) talks of tapering of quantitative easing in the US lately (with interest rates likely to be increased to its historical mean in the future after years of ultra-loose monetary policy); and 3) the US dollar has been appreciating together with a recovering US economy.
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