Recently, the yen has experienced dramatic depreciation, sparking various speculations in the market.
Some attribute this to the instability of the U.S. election year, while others speculate if Japan is spiraling into a state of loss of control.
Among the speculations, some believe that the Chinese yuan could become a significant target.
However, even with fluctuations in the yuan, the rapid depreciation of the yen indicates that the situation is not straightforward.
The United States and Japan seem to be tacitly pursuing some goal, but what exactly is their intention?
Let's review how the U.S. dollar's attack on Asia unfolded.
On the surface, accompanied by coercive pressure, the yen experienced self-devaluation, perhaps with the assistance of the South Korean won, attempting to break through the exchange rate defenses of major Asian currencies.
Not long ago, Japan raised interest rates, first withdrawing some yen from Southeast Asia, exacerbating liquidity tightness, and making Southeast Asian foreign exchange reserves even more fragile.
Subsequently, the rapid depreciation of the yen could lead to the instantaneous collapse of the Southeast Asian exchange rate system.
If one or two countries find it difficult to support themselves and their exchange rates collapse, the floodgates will open, assets will depreciate severely, and it could potentially trigger a setback in the entire Southeast Asian economy, as it did in 1997.
Then the dollar will take advantage of the situation and complete a round of harvesting.
It is well known that Asia is the cornerstone of China, especially Southeast Asia, which is the most important processing and trading base for Chinese manufacturing.
And Southeast Asia is also the deepest market for the yen.
Currently, the exchange rate in Vietnam has dropped significantly, putting it in danger.
But as long as the yuan can hold out, stability can be maintained overall in Asia.
Despite fluctuations in the yuan exchange rate, it remains mostly between 7.23 and 7.24.
Clearly, even if the Americans attack the yen, they cannot shake the position of the yuan.
Apart from the yen and the Vietnamese dong, other Asian currencies are mostly stable.
Currently, the depreciation of the yen is still ongoing, and the Federal Reserve has not lowered interest rates. It has even threatened to raise them.
This offensive is still ongoing.
Any currency needs underlying assets to maintain stable value.
The support for the yuan is the Chinese economy. As long as the Chinese economy remains stable, the yuan will not collapse.
The core of the Chinese economy is manufacturing, and as long as Chinese manufacturing does not collapse, the Chinese economy will not encounter major problems.
However, both the Chinese economy and Chinese manufacturing are highly dependent on foreign trade, especially exports.
Firstly, the significant interest rate hike by the U.S. has tightened global liquidity, weakened international trade activity, and hit global manufacturing hard. This impact on global trade is evident. According to a report published by the United Nations Conference on Trade and Development website, global trade fell by a record 5% in 2023 compared to 2022, to around $30.7 trillion.
Major manufacturing countries in developed countries such as Japan and South Korea have experienced trade deficits, and the manufacturing industry in Germany is in trouble.
Last year, China's exports were also significantly affected, dragging down the manufacturing sector.
Secondly, forcing U.S. investment banks to stop investing in Chinese manufacturing companies has weakened the capital adequacy of Chinese manufacturing.
Thirdly, the unilateral designation of us as developed countries by the U.S. deprived China of its manufacturing advantage as a developing country under the WTO framework.
Fourthly, cooperating with Japan to support Southeast Asia and India and accelerate the relocation of China's industrial chain outside China.
Fifthly, cooperating with Mexico to review and restrict Chinese manufacturing enterprises' entry into the U.S. market through investment, prompting Mexico to impose tariffs on more than 500 goods and starting a trade war.
Sixthly, promoting the depreciation of the yen to increase the competitive advantage of Japanese and Korean manufacturing, especially weakening the price advantage of Chinese manufacturing.
Because Japan and South Korea are among the few competitors globally that can compete directly with Chinese manufacturing.
At the same time, it also affected Vietnam, making Mexico and Vietnam, the largest transit trade bases for Chinese manufacturing, affected.
This series of actions clearly demonstrates American strategic intent.
Pushing for the depreciation of the yen is the final step in this strategy.
Currently, the world's three major economic and wealth centers are located in North America, Europe, and Asia, with Asia's rise being the most prominent.
This invisible war is more severe and thrilling than actual conflicts.
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