The timing of Japan's maneuver is exactly after the US decision to implement quantitative easing and ahead of G7 informal meeting. It seems that currency politics play a vital role.

However, some possible ramifications of this strategy would potentially threaten the stability of the international financial structure as a whole. Japan's short-term intervention and the use of ZIRP may lead to a global currency competition, or more precisely, a devaluation race.

Although the use of quantitative easing has only taken place in the US and Japan so far, it would be very damaging if all related countries engaged in a devaluation race.

The scenario looks like a redistribution of political power associated with currency dominance among countries. Now, Japan has played the prelude.

It is sometimes exciting to envision a global organization that could referee such currency competition. IMF is believed, by many experts, to be a sound candidate.

However, it could only offer a platform rather than guidelines. The G20 is a more promising choice. Although it is also unable to strictly enforce effective supervision, it does well to incorporate emerging countries.

Ultimately, China should realize the purpose of Japan's financial maneuvers and respond to them cleverly. The G20, as stated above, is a sound mechanism. The priority is to actively discourage a devaluation race and ward off pressure on the yuan.

China may also need to stabilize its domestic finances, which might be precarious given problems like local government debt and the incorrectly-priced property market.

Global Times reporter Wang Di compiled this article, based on an interview with Liu Junhong, research fellow with the Institute of Japanese Studies, China Institutes of Contemporary International Relations. wangdi@globaltimes.com.cn