The whole people "betrayed the country", and the yen was blown up

Big Cat True Detective Agency

2024-04-28 16:33Posted in Beijing Finance and Economics Creators

Author | Cat brother

Source | Big Cat Finance Pro

The yen is out of the rhythm of the crash.

The exchange rate fell below 158, the lowest point in 34 years, and the momentum is quite strong, obviously it is the exchange rate, looking at the trend chart to think it is a stock, and there is no end in sight to this decline.

It's a bit scary.

More than a month ago, Japan originally planned to have a big meal with its big brother America, but now it has been put on the menu by its big brother.

Remember, everyone thought the dollar was going to cut interest rates, and the Americans thought so, so they forced Japan to raise interest rates.

Japan is reluctant to live or die, it is all thanks to Abe's three arrows of easing, they see the hope of economic recovery, and they definitely do not want to tighten.

But they can't help it, because they have been the little brother of the United States for so many years, they have experienced a good life of eating and drinking spicy food, and they have not been cleaned up, so they basically have no independence in monetary policy.

The United States' thinking is very clear, it is a big sickle, first raise interest rates to recover the dollar, and then let Japan raise interest rates to recover the yen, Japan is a small sickle, they are such a combination, it will produce the effect of a combine harvester, and it will be difficult for other countries to bear, so that there will be more countries to pull, and the harvesting effect is the best.

Of course, what they want to do most must be us, how many times have Wall Street shorted the RMB, but our money here is not just in and out, and there is still a lot of foreign exchange, so the harvesting effect is not ideal.

Then, all of a sudden, things took a big turn.

The U.S. economic data came out, the inflation data was not good, and the high interest rate had to be maintained, not only could not cut the interest rate, but it may have to raise interest rates, or even increase to 8%.

Although they know that by doing this, American banks will have to die a lot, such as Republic Bank will be the first to fall and become the first American bank to die in 2024, and there are more than 180 banks with this risk, but they must have weighed it, and it doesn't matter if these banks are all dead, which is indeed more common in the United States, and they can adapt to it.

But with such an emergency U-turn, the little brother Japan will be miserable.

The dollar is negatively correlated with everything denominated in dollars, and if the dollar rises, the yen suffers.

Japan was going to have a big meal with his big brother, but he was put on the menu by his eldest brother.

Why did the yen fall so sharply?

Because, there is an arbitrage spectacle in the market that has not been seen in decades - except for the Bank of Japan, basically the whole world is shorting the yen.

Even many Japanese institutions, including the famous Mrs. Watanabe, are selling yen and buying dollars, according to our words, this is all a Japanese traitor, but in the face of huge profits, what is the festival?

How profitable is it? I'll give you a simple reckoning.

In March 2022, the United States began to raise interest rates, and the yen exchange rate was 110, if you exchange 1.1 million yen for 10,000 US dollars and get it to a US bank to earn interest, the total income in these two years can almost reach more than 8%, and if you take out these dollars in these two days and then exchange them for yen, you can get 1.71 million yen, which is 610,000 yen more than two years ago, and the total income in these two years can reach 55%!

This is basically risk-free arbitrage, and now in this environment, where can you buy such financial products?

In addition, some people say that the interest rate of the dollar is 8%, so what else to consider, so everyone is frantically selling yen and buying dollars, and the whole world is short, and Japan can't bear it at all.

This has a very, very big impact on Japan because they need to import so many things.

If the exchange rate plummets, it will cost a lot of money, and prices may have to rise, and although Japan wants inflation, it does not want this kind of devastating imported inflation.

The worst is the people and small and medium-sized enterprises, because the cost of raw materials has risen sharply, and now many Japanese small and medium-sized enterprises have fallen back to the bottom, the people have finally dared to consume because of the rise in wages, and now they have begun to cut back on food and clothing, Japanese statistics say that household spending has declined for 12 consecutive months.

It is also difficult for large domestic enterprises, the cost has increased, and the income has also declined if consumption does not rise, so the performance will definitely fall, and as a result, their performance in the stock market will also deteriorate.

As we all know, the Japanese stock market was very bullish last year, but one of their big problems was the exchange rate, and it was calculated at the time that if the exchange rate fell below 152, the attractiveness of the Japanese stock market would be greatly reduced, because you finally made some money, and you may lose a lot of money in exchange.

In late March, the exchange rate stood above 152 and the Nikkei fell by 10 points.

Now the most urgent is Japan's domestic enterprises, they are worried, not good, the economy has to fall back, so they are urging the central bank to act quickly, but the Bank of Japan has been wait-and-see, from 150 to 158, they also put forward a lot of objections, such as the exchange rate drop is indeed not conducive to imports, but it is good for exports, domestic prices do have the risk of getting higher, but tourism has risen sharply.

So whether they can make a move or not depends on how they measure it.

Maybe what they said is right, now go to Japan to feel a feeling, there are too many Chinese! It's all about playing to sweep goods, because it's much cheaper than before, the yuan for yen has never been so cheap as now, and buying things is a big discount.

India's nominal GDP was expected to surpass Japan's to become the world's fourth-largest economy in 2025, but if it continues, it may be about the same this year.

Now in addition to Japan, South Korea, Thailand, Indonesia are very suffering, the speed of depreciation is very fast, these two days, the central banks have intervened, temporarily stabilized, but like Thailand, Vietnam, these countries, the family is too thin, the ability to resist the attack is not good, the United States will make another force, the Asian currency crisis is likely to appear, in that case, 24 years may be more difficult than 23 years, get ready.

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