["Asia‐Pacific Economic History Review, Volume 66, Issue 1, Page 58-80, March 2026. ", "\nAbstract\nWe 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.\n"]