Fugitive or orphan? The Shanghai yen in the early days of the Sino‐Japanese war, 1938–1939

2026/03/01 by Shinji Takagi · 1 voice
Arts and Humanities · Economics, Econometrics and Finance · Social Sciences · #Art History and Market Analysis #Historical Economic and Social Studies #Japanese History and Culture

paper · doi:10.1111/aehr.70027

openalex publication_date 2026/03/01 · openalex created_date 2026/03/10 · openalex updated_date 2026/07/30

Abstract

Abstract We explore a phenomenon observed during the Second Sino‐Japanese War in which the value of the yen in Shanghai fell below the official rate. Shanghai provided a parallel market in which yen could be traded indirectly against British pounds through the intermediation of the Chinese yuan. The implied yen–pound rate was broadly approximated by purchasing power parity (PPP) before a significant divergence from PPP emerged in favour of the pound. This likely reflected negative news that signalled, among other things, a prospective withdrawal of Japanese yen as occupation money, which meant that the parallel market would close.

Discussions

• Shinji Takaji argues that overvaluation of the yen 1937-39 forced Japan to depreciate for its spending in occupied Central China resulting in a parallel exchange market & substantial foreign exchange [bsky, 4 points, 0 comments]

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