In recent years, more and more people have noticed the accelerated depreciation of the yen, which has raised concerns about the state of the Japanese economy.
Recently, the United States suddenly took action against Japan, giving us a glimpse into the fierce struggles behind the scenes and further revealing the fragility of the United States itself.
First, let's review the course of events.
In late April and early May, international short sellers massively shorted the yen, causing it to plummet, even briefly falling below 160, hitting the lowest point in over 30 years.
Subsequently, the Bank of Japan urgently intervened, using over 9 trillion yen of foreign exchange reserves to intervene in the market, successfully repelling the international shorts and stabilizing the yen exchange rate around 153.
However, by June, the yen once again showed a slow downward trend.
This decline was not directly related to international shorts or the United States but was mainly due to interest rate cuts by currencies such as the euro and the Canadian dollar, leading to a short-term strengthening of the US dollar, which in turn affected the yen and the yuan.
Although the United States did not directly intervene, it does not mean they did not take other measures.
In fact, the United States has conducted various overt and covert negotiations, pressures, and even threats.
What most displeased the United States was that behind Japan's intervention in the exchange rate, Japan did something that made the US very uncomfortable.
On June 18, data released by the US Treasury Department showed that in April 2024, Japan reduced its holdings of US Treasury bonds by $37.5 billion.
Previously, Japan had been increasing its holdings of US Treasury bonds for six consecutive months, even continuing to do so when the yen fell below the 160 mark.
The only reason for Japan's sudden large-scale reduction in US Treasury bonds was to raise dollars to stabilize the yen exchange rate.
According to data from the Bank of Japan, of Japan's $1.3 trillion foreign exchange reserves, most have been used to purchase US Treasury bonds, with less than $200 billion in cash dollars.
For an economy as large as Japan's, such a small amount of cash dollars is obviously far from enough.
Out of necessity, Japan had to sell US Treasury bonds to raise foreign exchange funds.
Although this operation is understandable from Japan's perspective, the United States obviously cannot accept it.
At a critical moment of the US debt crisis, Japan's large-scale sale of US Treasury bonds made the US very unhappy.
Thus, on June 20, in the semi-annual currency report submitted by the US Treasury Department to Congress, Japan was included in the monitoring list of currency manipulators.
Although no country was marked as a "currency manipulator" in this report, including Japan in the monitoring list is already a serious signal.
Being included in the monitoring list of currency manipulators is clearly a direct warning to Japan, with the next step possibly being formally designating Japan as a currency manipulator and facing related sanctions.
This move is not just a warning but more like a direct declaration of war against Japan, indicating that the US may once again take action against the yen.
Sure enough, this announcement caused the yen to fall again, with the yen exchange rate approaching 159.8 on June 21, nearing 160 again.
This behavior is undoubtedly a great encouragement to international shorts, potentially leading them to re-enter the market in large numbers to short the yen.
Faced with this situation, Japan certainly will not sit idly by.
On the same day, Japan's Vice Minister of Finance, Masato Kanda, reiterated that if excessive foreign exchange volatility is observed, appropriate actions will be taken as needed.
Surprisingly, Japan dares to openly confront the US this time, and there are two significant dangers behind this that make the Japanese authorities have to be on high alert.
Firstly, the sharp fall of the yen is not just a currency issue but a crisis for the entire Japanese economy.
Due to concerns about the stability of the Japanese economy and the value of the yen, yen assets are rapidly fleeing Japan.
Data shows that in May this year, the net purchase amount of overseas investments by Japanese domestic investment trust companies and asset management companies reached 1.3719 trillion yen, a record high for a single month.
The continuous depreciation of the yen has exacerbated this trend, further threatening the stability of the Japanese economy.
Secondly, as of now, the yen has fallen for seven consecutive days, marking the longest losing streak since March, with the yen's year-to-date depreciation against the US dollar exceeding 12%, making it one of the worst-performing currencies globally.
The continuous depreciation of the yen not only puts pressure on the Japanese economy but also has certain impacts on the global financial market.
Moreover, Japan's bold confrontation with the US is not only a matter of necessity due to facing a crisis but also indicates a potential decline in US control.
Japan's domestic resistance forces are rising again.
In fact, resistance forces in Japan have always existed and have always been suppressed.
The most typical example is former Prime Minister Shinzo Abe, who in his later years in office gradually pushed for Japan's independence, but was later suppressed.
However, this has not stopped the resurgence of resistance forces within Japan, especially as the US faces various challenges in recent years, and they also hope to take advantage of the situation.
For the United States, Japan is a country of significant symbolic meaning.
Controlling Japan symbolizes whether US power is still strong.
If it fails to control Japan, it will face a more dangerous situation.
Many countries around the world, including Germany, are watching the situation, evaluating whether US power and influence are still intact.
Therefore, the story for the rest of 2024 might be very exciting.
This currency and economic struggle between the US and Japan is not just a bilateral contest but an important test of the global economic and financial landscape.
How to achieve a balance in this struggle will have far-reaching impacts on the future international economic order.
How Japan will respond to the dual pressures from both internal and external sources, and how the US will maintain its position as the global economic hegemon, are important topics worthy of attention.
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