Author: Li Yunfei|Source: Original
Japan has sold 60 billion US bonds to save the foreign exchange market, or it will sell another 200 billion US bonds, and the United States has finally begun to give verbal warnings, so where is the future of Japan? Will he change sides?
Just when the yen depreciated to 160, the Bank of Japan finally intervened, appreciating the yen exchange rate by more than 5% in three days, to around 152.
According to the data provided by the Federal Reserve, the US dollar for Japan's intervention in the foreign exchange market may come from the foreign reverse repurchase agreement facility provided by the Federal Reserve. Because Japan will put some of its foreign exchange here to earn overnight rates, and now this part of the money is decreasing. According to the Bank of Japan, the scale of Japan's intervention in foreign exchange may be as high as 9 trillion yen, equivalent to 60 billion US dollars.
Although no one has made it clear that Japan is dumping US bonds to save the foreign exchange market. But what I want to say is that one is for face, and the other is for face. However, there is no doubt that Japan's sell-off of US bonds to save the foreign exchange market has become a fact. According to the prediction of internationally renowned investment banks, in order to save the yen exchange rate, Japan may sell another $200 billion of U.S. bonds next!
Then the unthinkable happened.
Lao Bai began to blame Japan in disguise, saying that the reason why Japan is experiencing economic difficulties is because of your xenophobia and resistance to immigration. But what I didn't expect was that Japan immediately began to respond to the fact that although we are struggling to grow economically, we are opening our doors to more immigrants because of Japan's aging population. That's kind of interesting, the eldest brother and the younger brother are arguing now!
It is said that Japan has always been submissive to the United States, but why did it disobey this time? If we connect the following series of causes and consequences, then it is not difficult for us to understand why Japan has done this? We will also have a clearer idea of where Japan's future lies.
Just two days ago, the Fed said that the dollar would keep interest rates unchanged. This means that the dollar has paused interest rate hikes for the seventh time since the July 2023 rate hike.
As we said before, one of the reasons why the dollar does not cut interest rates is because the data on high inflation and strong employment in the United States are still very strong, which provides enough reasons for the dollar not to cut interest rates. Another is that because the United States is competing with China, the United States wants to achieve the goal of creating an Asian financial turmoil by continuing to tighten its monetary policy.
But what I want to say is that in the economic game between China and the United States, which is dominated by the United States, it can be said that China is as stable as a rock, but the third party will definitely be hurt. For example, Japan. The yen hit a 34-year low due to the strength of the dollar exchange rate. While a moderate depreciation of the yen would benefit Japan's exports, a sharp depreciation would mean that Japan's wealth would be hollowed out by the United States. Now that investors from all over the world are flocking to Japan to buy cheap real estate, isn't this a huge loss of wealth?
In the face of a strong dollar exchange rate, Japan actually has only two options, one is to raise interest rates through the yen, and the other is to sell US bonds to save the foreign exchange market. Obviously, after 30 years of stagnation, the Japanese economy is certainly unwilling to curb domestic economic development by raising interest rates. This is because the yen's interest rate hike is not only appreciating externally, but also internally. In comparison, intervening in the yen exchange market is the best way. Because after intervening in the foreign exchange market, the yen is only appreciating against the dollar, which will prevent a large amount of capital from fleeing to short the Japanese economy, and can also maintain the healthy development of the Japanese domestic economy.
However, the embarrassing thing is that the Japanese prime minister has just finished a friendship dinner with Lao Bai and said that he will strengthen cooperation, and if Japan is about to sell US bonds at this time, how can he explain this to Lao Mei? However, if Japan does not sell US bonds, Japan will have many problems now, but the old United States will also put a smoke bomb, and those so-called promises will never be far from quenching their thirst!
This is the reason why both the United States and Japan have made it clear that Japan is intervening in the foreign exchange market, but they have not explicitly stated that Japan is selling US bonds to intervene in the foreign exchange market. It can be said that one is to save face, and the other is to give face.
However, of course, Lao Mei knows Japan's behavior. We can better illustrate this point through Lao Bai's rebuke, that is, your economy is not good, it is not because of me, but because of your own reasons. In one sentence, the black pot was thrown cleanly, and at the same time, it was putting pressure on Japan to warn, don't go too far, just sell some U.S. bonds!
But what Lao Mei didn't expect was that Japan began to resist and blatantly refused to give Lao Bai face. So where is the strength of Japan's resistance?
1. The strength of the U.S. dollar index has indeed hurt Japan's economy.
I didn't speak at 155, but now it's over 160, a 34-year low, and if I remain silent, Japan will probably lose another decade. In other words, you just blindly harvest us, and say that our economic difficulties are because we are xenophobic? What you say is so hurtful!
Therefore, Japan's resistance is also conveying to Lao Mei, Japan's situation to this day is caused by your Lao Mei, you can't talk nonsense with your eyes open, now you really hurt me, I have to resist!
2. The U.S. economy is really bad.
Behind the high inflation and strong employment in the United States, in fact, the Federal Reserve has been releasing water. The United States is now reaping the world's wealth by continuing to raise interest rates, and on the other hand, it is constantly releasing water to save the domestic economy. Against this background, everyone knows very well whether the dollar can expect to cut interest rates? It can be said that the United States will not be able to choose an interest rate cut that is easier for the dollar unless it causes several countries to collapse and go bankrupt.
In other words, Japan is the closest little brother of the United States, and if the United States continues to raise its sickle, then Japan will be the first country to fall, and Japan is certainly well aware of this. Japan's current revolt also reflects its dissatisfaction with dollar policy.
As for what is the future of Japan?
It can be said that it depends on how long the Sino-US economic game created by the United States will last? As the saying goes, the eldest and the second boss are fighting, but the third is gone.
If the economic game between China and the United States continues like this, then Japan will always be a man-made sword, and I will be the biggest victim of it. This is why well-known international investment banks predict that Japan will sell 200 billion US bonds next.
If this situation really develops, then Japan will replace China as the country with the largest sell-off of US bonds in the world, which will be another fatal blow to the United States.
It can be said that the current economic game between China and the United States has evolved into a global economic game against the United States. If nothing else, the dollar will be forced to cut interest rates at the end of the year. What do you think?
Author: Li Yunfei, founder of a large Internet company, CEO of a large food chain enterprise, engaged in the Internet and physical chain industry for 20 years, has been reported by Sohu.com, Netease Finance, Tencent, Phoenix.com, Zhongxun.com, Baidu and other well-known media platforms, good at financial knowledge analysis, entrepreneurial guidance!