Preamble:
Under the changes unseen in a century, currency wars broke out, and the former king of the yen suffered Waterloo.
In the face of the pressing US dollar, the 9.8 trillion reinforcements are not yet capable of turning the tide, is there still a way out for Japan?
The Yen Bloodbath: The Former King, Why Is It Here?
In 1985, the U.S. dollar was worth 240 yen per dollar, and at its peak it reached 80 yen per dollar. That year, Japan's GDP totaled $4.3 trillion, tied with the United States' $4.3 trillion.
At that time, the yen was strong and proud of the crowd, competing with the dollar. In the streets and alleys, people are holding their toes high, as if they are holding priceless treasures.
In 2023, the yen will fall to 1 to 160 against the dollar. The myth is shattered, and the bubble dissipates. The glory of Japan's economy has become a yellowed picture of history. Who is it that made the former king fall to such a point?
The main culprit is the Federal Reserve's interest rate hike. Since 2022, the Fed has been raising interest rates at an accelerated pace, and interest rates have been climbing. The U.S. dollar index is rising, and its ability to absorb gold is becoming stronger.
Japan, on the other hand, is still obsessed with the "zero interest rate" policy, violating the laws of the market, and resting on its laurels. The law of the jungle in the capital market is cruel, the law of the jungle is cruel, and the survival of the fittest.
Where will international capital let go of such a fat prey? They sold the yen and bought dollars like crazy, causing the yen to depreciate like a bamboo.
The imbalance between supply and demand has made matters worse. Japan's domestic demand is sluggish, consumption is sluggish, and economic growth is sluggish. Export trade was once the lifeblood of its economy, but the depreciation of the yen has caused the price of imported raw materials to skyrocket, and the cost of production has risen.
Small and medium-sized enterprises are struggling, and countless people are bankrupt and bankrupt. According to statistics, the failure rate of small and medium-sized enterprises in Japan in 2023 will increase by 15% compared to 2022. The unemployment rate has risen, people's livelihood has withered, and people's lives have become even worse.
The former king, the scenery is no more. The dollar is arrogant, and the yen is out of the market. 1 dollar is worth 148 yen, the lowest point in 38 years! Can the 9.8 trillion yen bailout still save the yen? What else can the Japanese government do?
The 9.8 trillion reinforcements collapsed, and Japan was stumbling under internal and external troubles
The depreciation of the yen is in full swing, and the situation is extremely serious. The Japanese government panicked and offered 9.8 trillion yen to intervene in the market, trying to turn the tide. 9.8 trillion, what a huge number!
This figure is equivalent to 20% of Japan's total GDP. The financial budget is generous, and the blood is paid!
In April, 9.8 trillion yuan made a brazen move, vowing to stabilize the yen exchange rate. For a time, the yen appreciated and the dollar dived. "It's done!" The decision-makers secretly rejoiced, thinking that they had won a big victory.
As everyone knows, this is just the calm before the storm. The undercurrent of the international capital market is surging, and the shark is ready to move, waiting for the opportunity to move.
When the time came to June, the Fed's interest rate hike boots landed.
The bad news came, and the yen exchange rate against the US dollar hit a new low, falling below the 1:148 mark!
9.8 trillion reinforcements, powerless, collapsed. The bailout plan has failed, so where does the yen go from here?
Some enterprises have closed down, and the people are struggling to make a living.
According to the Nihon Keizai Shimbun, in the first half of 2023, the number of Japanese company failures surged by 20% year-on-year. Small and medium-sized enterprises are struggling to live and die, and employees are forced to take unpaid leave or even be laid off.
Japanese people's wallets are getting more and more flat, and consumption is even more sluggish. There is an exodus of capital and financial market turmoil. Since April 2023, the cumulative outflow of funds from the Japanese securities market has reached $100 billion. The stock market plummeted, and the Nikkei index plummeted.
Internal and external troubles, a double blow. Japan's economy is on thin ice, and the outlook is worrying. According to the International Monetary Fund, Japan's economic growth will slow to 0.5% in 2023, much lower than the 2.1% in the United States.
Domestic demand is weak, exports are sluggish, and finances are tight. The yen depreciated, and the people paid the bill. Prices are skyrocketing, wages are falling, and life is getting worse.
9.8 trillion, a lot of water. The depreciation of the yen is unstoppable. Japan, is there a way out? Fiscal policy is gradually coming to an end, and monetary policy is poor in donkey skills.
There is no way to retreat: attracting investment, sniping at U.S. debt, Japan is fighting against the water
The yen exchange rate fell endlessly, and 9.8 trillion reinforcements were defeated.
Internal and external troubles, embattled. Japan's economy is in jeopardy. At the most critical moment, there is no way back! Attracting investment, sniping at U.S. bonds, and fighting against the odds may be the last chance.
Inward efforts, tax cuts and subsidies, and investment attraction. The Prime Minister of Japan issued an emergency decree that in the second half of 2023, the corporate income tax will be halved, and the high-tech industry will be reduced by 80%!
According to data from the Tokyo Stock Exchange, in just one week, the Japanese market attracted a record high of 50 billion US dollars in foreign investment! Foreign capital buys the bottom, Japanese companies breathe, a glimmer of life!
Consolidate domestic demand and save people's livelihood. Unemployment is soaring and consumption is sluggish, how to break the situation? Japan's finance minister shouted: Increase unemployment insurance premiums by 50 percent, double subsidies for low-income families, and increase the face value of consumption vouchers by 30 percent. The people's hearts are warm, consumption is picking up, and Japanese companies are reinvigorating.
Push outward, sell U.S. bonds, and hit the dollar. According to the Ministry of Finance of Japan, as of June 2023, Japan holds $1.2 trillion in U.S. Treasury bonds, ranking first in the world!
It is clear that it is the largest creditor of the United States! To dare to "sell" U.S. bonds is to dare to argue with the dollar!
In July, Japan sold $50 billion in government bonds, and the dollar fell in response, down 2 percent!
Sniping on U.S. bonds, hitting the dollar, and fighting for respite. The Fed's interest rate hike cycle may be peaking, and calls for interest rate cuts are gradually rising. Sell another 100 billion U.S. bonds, forcing the Fed to comply, and the appreciation of the yen is just around the corner! If you really dare to play like this, you will lose both, and no one will be able to please you. Will the United States sit idly by? If we continue to chase after it and raise interest rates repeatedly, Japan may not be able to escape.
In a battle against the odds, success or failure is in one fell swoop. Cultivating the "roots" inside and practicing the "legs" externally may be able to turn the tide. Domestic demand is picking up, foreign capital is pursuing, and the yen is appreciating, just around the corner. Sniping at the dollar, suppressing U.S. bonds, and forcing the Fed to comply, may turn the corner. The situation is abrupt, the crisis is organic, and the opportunity is fleeting.
The wheel of history rolls forward, and although the king is broken, the spirit lives on. The fate of the yen, the future of Japan, depends on this war!
Leaving it to die and then reborn, until the last moment, no one knows what the outcome will be. Let's wait and see what happens!
Epilogue:
The depreciation of the yen reflects the imbalance in the world's monetary system today, with the US dollar dominating and other countries' currencies in jeopardy. Japan's predicament is not only the result of its own economic structural imbalance, but also a microcosm of many countries under the hegemony of the US dollar.
In the face of the cruel game of currency war, only by forging ahead and striving to save ourselves can we remain invincible in the changing situation.