In mid-April, when U.S. Secretary of State Antony Blinken landed in China with a serious face, he originally hoped to influence China's policy through tough financial means. Blinken's trip, ostensibly for negotiations, threatened to remove certain Chinese banks from the international trading system.
This direct threat seems to be a tough display by the United States on the international stage, but in reality, Blinken returned empty-handed, and this kind of intimidation did not cause much reverberation in China.
At the same time, the real storm is quietly detonating in Japan. Over the past decade or so, Japan has experienced an unprecedented financial shock. The yen fell sharply from 154 to 158 at a speed and magnitude not seen in 35 years.
The depreciation of the yen has a direct impact on domestic prices and the cost of living for the people. According to the latest data released by Japan's Ministry of Health, Labor and Welfare, Japan's per capita real wage has fallen for 23 consecutive months, with a decline of 1.8% in the previous month.
Normally, in the face of such a severe currency depreciation, the Bank of Japan should take measures to stabilize the exchange rate and protect the national economy. However, in practice, the Kishida government seems to have opted for a reactive strategy.
The Bank of Japan theoretically has two options: one is to raise interest rates, and the other is to sell its foreign exchange reserves to stabilize the local currency. However, due to the huge pressure on Japan's national debt, a large rate hike is almost tantamount to self-destruction. As a result, selling off foreign exchange reserves became a possible option.
In fact, the Kishida government has hinted that it will intervene in the market if the exchange rate falls below expectations. However, U.S. Treasury Secretary Janet Yellen was quick to say that exchange rate intervention is a very rare act for G7 countries. This statement undoubtedly put a direct obstacle for the Bank of Japan, causing the Japanese government to finally abandon its plan to intervene in the exchange rate.
In the United States, interest rate hikes have contributed to the appreciation of the dollar, which in turn has led to the depreciation of the yen. This depreciation not only lowered the cost of imported goods in the United States and helped bring down domestic inflation, but also accelerated the loss of Japanese national wealth by promoting capital flows from Japan to the United States.
The United States has also effectively prevented Japan from releasing a large amount of dollar reserves to become hot money by controlling the flow of foreign exchange reserves from the Bank of Japan. Finally, U.S. policies have also indirectly influenced Japan's domestic policymaking, making it seem helpless to deal with the financial crisis.
In this series of events, both Japanese citizens and companies are feeling the tremendous pressure.
Due to the continuous depreciation of the yen, the cost of imports has risen sharply, and many companies that rely on imports are beginning to face a severe test of survival.
For example, Japan's automobile manufacturing and electronics industries, which are globally competitive, are now struggling due to rising raw material and component costs. In addition, as a resource-poor country, Japan needs to import almost all of its energy and food, and the sharp fluctuations in the exchange rate directly lead to the rise in domestic prices.
Faced with all this, the average family in Japan is starting to feel the increase in the cost of living. From food in the supermarket to daily electricity, from children's school fees to family medical expenses, almost all expenses are rising. Under these circumstances, although the Kishida government has proposed a number of measures to try to stabilize the economy and boost public confidence, the public's trust in the government is gradually declining.
At this moment, public opinion in Japan is also fermenting. Many people are beginning to wonder why Japan is in this situation, is it just because of the volatility of international financial markets, or is there a deeper reason?
There is a view that Japan's structural problems, high national debt, and long-term low interest rate policy are the root causes of Japan's current predicament. At the same time, some people believe that the Japanese government's passivity in the international arena has always put the country at a disadvantage in the global economic changes.
As time goes on, this battle over exchange rates and monetary policy will continue. The focus of attention is on how the Japanese government responds to these challenges, and how its eventual economic adjustment strategy will affect the lives of every ordinary person. In today's ever-changing international financial markets, Japan's future is full of challenges, but also full of possibilities.