This article is the original of "Finance Speaks Clearly", and is released simultaneously on various platforms and refuses to be reprinted.
In the past two months, Japan was still buying US bonds on a large scale, and unexpectedly, Japan's economic situation has taken a sharp turn for the worse.
The exchange rate against the dollar fell close to 148, reaching 147.9585 at the lowest of the previous two days.
Inflation is rising, unemployment is rising, and GDP growth is significantly lower than expected.
Many people feel that Japan may face another wave of harvest by the dollar.
01
Since the dollar hike, Japan has insisted on not raising interest rates and insisted on quantitative easing, which in itself is extremely risky.
This policy is likely to take on inflation that has been transferred out of the United States, and the current data seems to illustrate this, with the latest inflation-related data showing that Tokyo's CPI rose by 2.9% year-on-year in August, and the ratio is also rising.
The producer price index rose even higher year-on-year in August, reaching 3.2%.
In other words, both from the corporate and individual perspectives, the price increase we are now facing has exceeded the level that the Bank of Japan hopes to achieve.
Since the price increase was too high and the increase in wages could not keep pace, real income in Japan is now decreasing, and real wages fell by 2.5% in July this year compared to last year, a trend that has continued for 16 months.
Another statistic related to this is also very bad, that is, Japan's unemployment rate is rising.
At the end of August, Japan announced the unemployment rate for July, which was expected to be only 2.5%, but actually announced a figure of 2.7%. The unemployment rate is increasing faster than expected.
While the number of unemployed people is increasing, on the other hand, the real wages of working people are decreasing, and at the same time, they are facing higher and higher inflation, and we can see that the voices of complaints on the Internet in Japan are getting louder and louder.
02
In addition to its domestic problems, Japan is also facing serious problems in international trade and finance, the biggest of which is the exchange rate.
The yen has seen waves of declines this year, especially after mid-July, as the dollar index continues to strengthen.
In September last year, the yen fell below 145 against the dollar, which is the key point in the minds of analysts, and after falling below 145, Japan had to intervene in the exchange rate.
But unexpectedly, in September this year, the yen fell below 145 again, but this time the Bank of Japan intervened only verbally for the time being.
Analysts believe that if the exchange rate continues to fall, after reaching 150, the Bank of Japan will have to buy the yen on the currency market.
Under these circumstances, it is natural for the Japanese domestic media to reflect on the previous purchase of US bonds.
Last month's U.S. Treasury data showed that Japan suddenly bought U.S. Treasuries backhand after several sell-offs earlier this year.
This is not just a matter of asset allocation, in fact, buying US bonds is a pressure on the local currency. I really can't understand why Japan is ironclad in supporting the United States when the US debt is facing so many problems.
03
In order to cope with the harvest from the dollar, the Bank of Japan now has many tools in its hands, but it has not been able to make up its mind.
The outside world predicts that the Bank of Japan will raise interest rates, which is a strong means of support for the exchange rate.
But when will Japan raise interest rates?
At present, the Bank of Japan has taken a more dovish approach, that is, it has continuously increased the yield when buying Japanese government bonds.
More importantly, after tasting the consequences, will Japan sell US debt again?
The latest data will be released soon, and we will wait and see.
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