Japan is currently experiencing a harvesting game with American capital surrounding Japan, and now it has reached the stage where it is about to close the net.
In the last lost 30 years, Japan still maintained its position as one of the top three economies in the world, but this time, not to mention the top few economies, even the position of developed countries may not be able to be maintained.
Let's start with Mrs. Watanabe.
There is a legend in the financial market - "Mrs. Watanabe", which refers to a group of housewives in Japan who participate in foreign exchange trading outside of household affairs to increase their income, which is a term that almost everyone who comes into contact with the foreign exchange market has heard.
At the end of the 80s of last century, Japan's per capita GDP surpassed that of the United States, and household wealth skyrocketed, totaling more than 1,500 trillion yen (about 90.6 trillion yuan), of which more than 55% was cash and bank deposits.
In the 90s, in order to stimulate the economy, Japan implemented a long-term policy of low or zero interest rates, and Japanese housewives borrowed low-interest yen and invested in high-yield offshore bonds or foreign exchange deposits to arbitrage interest rate differentials.
A Japanese housewife with a successful record has earned more than $150,000 in six months, and she has even published a strategy book to share her success experience with more housewives.
It can be seen that Mrs. Watanabe earns interest rate differentials because of three factors: (1) low interest rates in her home country, (2) high interest rates in foreign countries, and (3) relatively stable exchange rates, and better depreciation of the yen. Of course, it is also possible to participate in foreign investment, but there may be greater risks.
Mrs. Watanabe generally sucks blood from the United States and then transfuses blood from Japan, but the United States can't do anything about them.
In the last 30 years, the USD/JPY exchange rate has fluctuated regularly between 75 and 150, with a pivot around 110. After 2021, due to the interest rate hike of the US dollar, the yen depreciated severely, from around 110 to around 150, and the yen depreciated by 40%, which is a good thing for Mrs. Watanabe, who invests overseas. If they are now exchanging their dollar assets back to yen, it means that their overseas assets have appreciated by 40%, and their purchasing power in Japan has increased significantly.
However, is the United States a fool who doesn't want to take countermeasures and stupidly let you get money?
In fact, Japan wants the interest of the United States, and the United States wants to be the principal of Japan, and Mrs. Watanabe is the lead for the United States to blow up Japan.
Why?
Because, now that the interest rate in the United States has increased to 5.5%, lending 10 million earns 550,000 a year for nothing, what does this lead to?
Mrs. Watanabe, who is engaged in foreign exchange speculation, frantically sells yen in the foreign exchange market, buys dollars, and then takes them to the United States to arbitrage, and the currency itself is also a commodity, and if there are many people who sell it and few people buy it, it will naturally depreciate.
At the beginning of the year, it was 115 yen to 1 dollar, and now it is almost 155 yen to 1 dollar, and the yen has depreciated by as much as 26%.
Japan is also an island country with extremely poor natural resources, and not only does it rely on imports for half of its fruits and grains, but it also relies on imports for natural gas and coal
。
Some time ago, some people said that Japan finally got inflation and got out of 30 years of deflation, but in fact, Japan wants to die.
What does inflation represent?
If the price of goods is expensive, it will inhibit everyone's consumption, and if everyone consumes less, it will affect Japanese enterprises, especially the survival of the industry, if there are enterprises that go bankrupt, it will definitely cause unemployment, and when the unemployment rate is high, everyone will be more afraid to consume, this is a vicious circle, and it is more and more serious, maybe there will be a big recession in Japan at that time.
In addition to Japan's inflation dilemma, the pressure exerted by the United States is also painful.
Some time ago, the market has been hyping that the Fed will start cutting interest rates immediately after the end of interest rate hikes, and if this is really the case, the yen will be able to appreciate, and inflation will naturally be solved.
However, the Fed has recently said that it may continue to raise interest rates, and the chairman of JPMorgan Chase said, "The Fed may raise interest rates to 8%, and they are ready to deal with it."
Although Japan's GDP is the fourth largest in the world, its debt ratio is the highest in the world, and its debt-to-GDP ratio is as high as 250%, ranking first in the world.
At present, Japan, interest rate hikes and no interest rate hikes are in an embarrassing situation, if the interest rate is raised, consumption has finally improved, driving economic growth, interest rate hikes may lead to consumption enthusiasm being extinguished, and the economy is more sluggish.
If interest rates are not raised, the yen exchange rate will only fall worse under the strong position of the dollar, and the Japanese economy will be frantically shorted.
As a result, the Japanese government was able to raise interest rates, but only by 0.1%.
As mentioned earlier, U.S. capital has long laid out a net of heaven and earth, as long as Japan really dares to raise interest rates sharply, it is to jump into the "blood basin mouth", you know, U.S. capital has long begun to invest in the Japanese stock market, the most high-profile of which is Warren Buffett.
By June 2023, Berkshire disclosed data showing that the average shareholding in the five trading companies (Mitsui, Itochu, Marubeni, Sumitomo and Mitsubishi) had reached 8.5%.
When the epidemic broke out in early 20, the U.S. government began to release a large amount of water and directly send money to the people for consumption, which will lead to inflation, and inflation will have to be curbed by raising interest rates. Japan is free of foreign exchange, and the U.S. interest rate hike will inevitably lead to the depreciation of the yen, and once the yen depreciates, Japan's assets will become cheap, so the rise of the Japanese stock market will become inevitable.
In addition, the depreciation of the yen and the cheaper Japanese goods will allow Japanese companies to export more and make more profits. According to estimates by Japan's Daiwa Securities, for every 1 yen depreciation of the yen against the dollar, the profit awards of all listed companies in Tokyo will increase by 198 billion yen.
Profits become higher and the stock market rises, which naturally becomes inevitable, which is the logic of Buffett's big profit of 70 billion in Japan.
The Nikkei Stock Average has risen from 16,000 points in July '20 to 41,000 points, more than 2.5 times, creating the largest bubble in Japan in 30 years.
It can be said that we are waiting for the United States to harvest now, but when? That is, the United States continues to raise interest rates, and the yen faces a more serious risk of depreciation, forcing Japan to fall into more serious hyperinflation, forcing Japan to raise interest rates sharply.
The end result will be a collective sell-off of international giants, which will drive the Japanese stock market, which already has a huge bubble, to fall at an even more terrifying speed, and the Japanese stock market will be in a mess while a large number of bears will flee.
According to reports, as early as early April, some international capital giants began to adjust their portfolios, buying yen and shorting Japanese bonds. These giants include UBS Asset Management, Schroders, RBC BlueBay, and others. Data from the U.S. Commodity Futures Trading Commission also showed that in the week ended April 2, there was a record 148388 short yen in holdings.
These international capital giants seem to have foreseen the storm ahead, and have laid out plans to short the yen early.
The 1990 economic crisis caused a large exodus of foreign capital to flee Japan, and a large number of yen was sold off and fell rapidly, and Japan did not even have enough foreign exchange reserves to cope with this situation.
Japan's economic bubble, which had been prosperous for 20 consecutive years, burst directly, making it completely impossible to sell land and defense, greatly shrinking national wealth, and forcing a large number of Japanese-funded enterprises to go bankrupt due to insolvency.
Now, it seems that this situation is about to repeat itself, and the Bank of Japan has repeatedly issued promises to take action against shorting.
But it seems that time is running out for Japan to take what measures it will take and how it will get out of this new round of short-selling.