Measured by value added, our bilateral deficits with China would have been far less, and our bilateral deficits with other Asian exporters would have been far more. Accordingly, an increase in the exchange rate of the RMB, relative to the dollar, would likely redirect trade within Asia, reversing to some extent the patterns that have emerged during the past half decade.
Japan has been experiencing gradual deflation, as consumer prices have ranged from -1 to zero percent year on year since the middle of 1998. In Europe and the United States, this disinflationary trend has brought real economic benefits, by securing a stable foundation for economic activity. The United States enjoyed a long-lasting economic expansion accompanied by price stability during the 1990s.