A Chinese scholar has claimed that the depreciation of the Japanese yen is malevolent and is the true cause of the imbalance in the global economy.

Wan Xiaoxi, senior researcher with China Southern Fund, said the current round of yen depreciation, which can be described as "malevolent depreciation", has exacerbated imbalances in international payments and encouraged carry trades in yen.

In an interview with China Business News, Wan said that like China, Japan has a trade surplus with most of its partners. He said that Japan's total surplus of 18.3 trillion yen (160 billion U.S. dollars) in 2005 was virtually identical to China's 160.8 billion dollars. Japan's surplus in the first half of 2006 was 9.5trillion yen (83 billion U.S. dollars), while the comparable figure for China was 91.6 billion dollars.

This similarity belied the two countries' radically different monetary policies: while the RMB appreciates slowly but regularly, the yen has continued to fall.

Since China launched its foreign exchange rate reform on July 21, 2005, the RMB has appreciated 5.8 percent against the dollar, and as much as 14.6 percent against the yen, Wan said.

"All the world's major currencies are appreciating against the dollar -- except for one. The fact is that the currency of the world's second largest economic power has been devalued since 2005in a malevolent way, and this is the major cause of the global imbalance," he said.

He pointed out that the yen interest rate is two to three percentage points lower than the RMB, and that this resulted in fairly high returns for carry trades between the two currencies.

He warned that if the yen continues to depreciate, then once China lifts its controls on foreign exchange, carry trades between the yen and the RMB could explode and China's forex reserves might blow out to 3 trillion dollars within two to three years.