The focus of the financial market this week was The Federal Reserve raised interest rates by 75 basis points, while central banks in Eurasia and Latin America responded differently. The Vietnamese central bank directly raised interest rates by 2100 basis points, Switzerland , South Africa and the Federal Reserve remained consistent with the Federal Reserve , and 75 basis points, while the central banks in the United Kingdom, Norway, Indonesia and the Philippines raised interest rates by 50 basis points, while China and Japan, both the second and third largest economies in the world, remained unchanged.
International hot money seized this opportunity and shorted the RMB and yen again. We are fine, the trade surplus, although the exchange rate is close to 7.1, it is still not bad.
But the deficit has been depreciated for several consecutive months. Japan, which has depreciated by 20% this year, felt uncomfortable, especially after the US dollar broke the psychological defense line of 145 against the yen, the Bank of Japan took action.
The Japanese method is simple and crude, sell US bond and buy yen.
The effect of this was immediate. The dollar-JPY exchange rate fell by more than 2%, from 145 to around 1 to 140.3. Although there was a rebound in the later period, it did not return to the previous high.
So what impact does the Japanese sell US bonds and buy yen have on the international financial market?
I personally think the impact is very great, and it kills two birds with one stone!
According to data released by the U.S. Treasury Department on September 9, the total amount of U.S. Treasury bonds is approximately US$30.9 trillion, of which approximately US$24.3 trillion are held by the public and US$6.6 trillion are held by the government, accounting for 21.35%. Among the remaining 24 trillion US dollars of US Treasury bonds held by the public, the amount held by central banks and international organizations by various countries is not less than 8 trillion. Among them, the central banks of China and Japan are the largest holders of US Treasury bonds, with a holding of more than 1 trillion US dollars. According to data at the end of 2021, Japan holds nearly 250 billion US dollars more US Treasury bonds than China.
In addition, how many of the US Treasury bonds held by the public are held by Japanese and Chinese citizens, the amount should be not low.
From a macro level, if international financial capital maliciously shorts yen successfully, it will trigger a short-term capital outflow and the Japanese economy will completely collapse.
In order to maintain the exchange rate, the easiest way for Japan is to raise interest rates, but due to the treasury bond bubble, Japan actually has no room for interest rate hikes. Japan's treasury bonds collapsed and the economy collapsed. What should we use to stabilize the exchange rate if we do not raise interest rates?
Japanese are not stupid either. Selling US dollars and buying yen is a good way to kill two birds with one stone, and they kill two birds with one stone in several dimensions.
The most superficial level directly raises the exchange rate. sells more US dollars, and the price of US dollars decreases. When more Japanese yen buys more, the price of Japanese yen increases. This is a killing of two birds with one stone.
A little deeper, it is to increase the cost of shorting the yen funds. The Bank of Japan's US dollar will definitely not be cash. It is an interest-free channel. We ordinary people are unwilling to put too much money. The Bank of Japan, which is known for its refined management and petty care, is unwilling to put it on US Treasury bonds at all. It must be put on US Treasury bonds to earn interest.
Then when Japan sells US dollars, the large amount of balancing will definitely not be sold, and it must be discounted a little. Therefore, the yield on US Treasury bonds soared in the short term under the Japanese operations, and the US dollar shortage in the capital market has intensified, and the cost of international hot money used to short the Japanese yen has also increased relatively.
On the one hand, the Japanese sold US debt, and on the other hand, they increased the cost of their opponents' capital. This is the second killing of two birds with one stone.
Another level is US debt crisis . Japanese sell US bonds in the short term, which has increased the yield of US bonds, but in the long run, there is less funds that can buy US bonds and take over the Federal Reserve's printing of money, and the long-term yield of US bonds will definitely decline. Will US bonds without a buyer lose liquidity, trigger panic selling among US bond holders and trigger a US debt crisis? This is the third killing two birds with one stone.The most core problem of
is to crack down on the hegemony of the US dollar . When the circuit breaker of in the first two issues of , we said that the three legs of US dollar hegemony are US dollar, US stocks, and US bonds. Now the US dollar raises interest rates, which is stronger than the US dollar, but the US stock market plummets. If the US bonds are destroyed again, will the Federal Reserve still have the courage to raise interest rates? The US dollar hegemony will be gone. If the interest rate is not raised, the US dollar will depreciate, and the US dollar hegemony will also be gone.
So the Fed must not let Wall Street attack the yen. After all, if the Japanese are forced to force the Japanese into a hurry and sell US debts, it may be one in 30. Even if is added to leverage , the Fed can handle it. However, if we follow up and there are other central banks running, the hegemony of the US dollar will be completely destroyed.
So, we say that the Bank of Japan is playing a beautiful trick of selling US debt to save the exchange rate, killing two birds with one stone, and shaking a tiger.
Of course, I really hope that Wall Street doesn't understand, or although I understand, Americans' self-confidence in their bones has instructed them to make the wrong choice.
See the essence through phenomena, find the truth through stripping the threads and decouples, move the body and open your mind, plan and think of countermeasures, thank you for your attention and joy!
