With the release of CPI data in May, the global financial market has encountered bloody storms and , and our neighbor Japan may be in a precursor to the collapse.
Japan is in a "crisis"
We know that there are three most important financial products in a country's financial market: stock market, bond market, and exchange rate .
In terms of the stock market, Japan's Tokyo 225 index fell 3%, and in terms of the bond market, the Japan's 10-year Treasury bond yield rose to 0.25%. More than the Bank of Japan's forecast, caused to intervene in and purchased 500 billion yen treasury bonds as a response.
Nikkei 225 index plummeted 3%
Today we will continue to talk about the biggest crisis in Japan that may occur in , the yen collapsed.
yen crash?
Since 2021, the yen has entered the depreciation range. Today, the yen has been exchanged from 103 yuan to 1 US dollar, and the depreciation has been exchanged from 135 yen to 1 US dollar. This year alone, the depreciation of the yen has reached more than 16%!
Starting this year, the yen has depreciated by 16% against the US dollar
At this moment, the originally confident Bank of Japan Governor Kuroda Haruhiko finally couldn't sit still. He publicly stated that the Bank of Japan will enter the market to interfere in the exchange rate market.
In Kuroda Haruhiko's "yell", yen recovered the 135 yuan mark, and the current exchange rate is 134.10. (see picture above).
Although Kuroda Haruhiko came out to stop the further rise of the yen, we need to answer a question.
Why did Japan suffer from a triple kill of "stock, bonds and foreign exchange"? Why is the yen depreciation so severe? Will the yen fall in the future?
"Not hike rate " Japan
Japan is very interesting. It has experienced the lost twenty years, and has caused the entire Japan to "pay debt" for the past. After the signing of the square agreement, the yen experienced a large-scale appreciation of
Why do you say so? We know that Japan experienced a boom period before the Plaza Agreement. At that time, Japanese goods flooded the US market and the stock market soared. The Japanese were extremely rich. Some even said that Japan could buy the entire US . The US government behind
began to panic. They were afraid that Japan would become the world's largest economic power, so they hit Japan in terms of semiconductors, automobiles, etc., and induced Japan to sign the square agreement, causing the yen to appreciate on a large scale.
1964, Japan, which was caught at the Japanese Olympic Games, began to experience an economic collapse. Many Japanese people spent huge amounts of money to buy houses during the prosperity period, and took loans for decades, and then they were forced to work to repay the loans and struggled.
This is the twenty years that Japan has lost.
Many Japanese people have been burdened with high mortgages
. The tragic situation of the economic crisis has caused the entire Japan to lose confidence in economic development, and they use all their money to repay debts and save money.
And Japanese companies are even more bizarre. They use all the money they earn to repay corporate loans. (Chinese companies, like Evergrande , all borrow from banks and then spend money desperately)
Japanese companies keep their money to repay debts
so you will find that Japanese companies have extremely low debt ratio. This causes the probability of Japanese companies going bankrupt is very low.
Let me tell you about the data. In 2021, the number of Japanese companies went bankrupt was 15,980, the lowest in 57 years, which was still under the impact of the new crown epidemic.
This approach has both advantages and disadvantages, that is, it causes severe deflation in Japan. The people of are unwilling to consume and pay off their debts. Even if the company makes money, it is unwilling to expand production and pay off its debts.
So the Japanese government can only be forced to stimulate the economy through the "0 interest rate" method and prevent serious deflation from continuing. So there is a situation that other countries cannot see: no interest rate hikes.
Japan Bank does not dare to raise interest rates
US inflation, global inflation, Japan does not raise interest rates
Japan, which does not raise interest rates, has encountered the invasion of European and American countries that are constantly raising interest rates.
After the release of the US CPI data in May, the inflation rate of 8.6% hit a 40-year high. This means that the subsequent Fed will introduce a more radical interest rate hike policy.
In May, the US CPI reached 8.6%
We know that the United States is the "central bank among the central bank". If the United States raises interest rates and Japan does not raise interest rates, then the " interest rate spread " will appear between the two countries. The funds in Japan will be harvested by the United States, causing the yen to depreciate significantly. This is the case now.
So can Japan follow the United States to raise interest rates (all the world is doing this except China)? The answer is also no.
Just as central bank governor Haruhiko Kuroda said, Japan needs to continue to maintain a loose policy unchanged without a strong increase in wages.
Kuroda Haruhiko: There is something wrong with foreign exchange, it is not my fault
Because he is afraid of taking responsibility, he also said that the foreign exchange matter is managed by the Japanese Ministry of Finance, regardless of the matters of our central bank, you can ask them.
In fact, Japan, which has experienced 20 years of deflation, has almost never raised its wages, and the yen is likely to continue to depreciate against the backdrop of US dollar interest rate hikes.
Japan Kobe Port
At this time, Japan is also facing a problem: if the yen continues to raise interest rates, the Bank of Japan is likely to consume a large amount of foreign exchange reserves to deal with it, In addition, Japan itself is an island country, which requires importing a large amount of resources and blindly depreciating the currency may cause an imbalance in imports and exports.
This is likely to put Japanese economy in a declining "vortex" crisis.
Currency War Repeated?
Such a significant depreciation of the yen has triggered discussions in the international financial community, and many people believe that the currency war is taking place. For example, the former chief economist of Goldman Sachs said: If further falls to 150 yen against the US dollar, it may trigger such turmoil as the Asian financial crisis in 1997.
Former Chief Economist of Goldman Sachs: If the yen depreciates to 150, there will be a currency war
Because if the yen depreciates, then the international price of products exported by will be cheaper , which will lead to the enhanced competitiveness of Japanese goods exports.
. In order to protect the interests of their export products, other countries may also adopt currency devaluation to deal with it. This is called "competitive devaluation". Although the reasons are different, the results of are likely to have formed a "currency war" that swept Asia in Southeast Asia like the Asian financial crisis in 1997!
1997 Asian financial crisis
Is the RMB facing a crisis?
Someone asked, Japan can no longer withstand the interest rate hike. After the US CPI of this time is as high as 8.6%, will the RMB further depreciate based on the depreciation of 7% this year?
The answer is possible.
From the exchange rate chart below, we can see that since the announcement of the US CPI, the RMB has depreciated for three consecutive days. This is because the market expects that the US rate hike will be more radical, so it responds in advance. The exchange rate depreciated from 6.61 to around 6.76.
The RMB has depreciated recently
So, when the United States continues to raise interest rates, the dollar is strong, all non-dollar currencies in the world (including the RMB) will be systematically affected, resulting in depreciation and weakness.
This is the impact of the hegemony of the US dollar! This is the fundamental reason why we want to oppose the hegemony of the US dollar.
But I also want to emphasize that China has always been "stability-oriented" in exchange rate issues. We have established a strong foreign exchange control system to prevent the "harvest" of the US interest rate hikes on China.
China's foreign exchange controls are relatively strict
Simply put, China has an additional "financial firewall" than all other countries in the world.
So when judging the foreign exchange situation, we must know that China is the country with the total amount of GDP second only to that of the United States. As a super-large economy , as long as there is no internal chaos and the fundamentals of remain healthy and stable, then the exchange rate cannot be broken down from the outside.
As long as China stabilizes its economic basic state, there will be no chaos
So according to the viewpoint of the Director of the State Administration of Foreign Exchange and economists, the subsequent RMB exchange rate has the risk of continuing to depreciate, but the risks are controllable. The exchange rate tends to stabilize.
summary
In general, Japan is currently suffering from a three-killed stock, bonds and foreign exchanges. This consequence is mainly due to Japan's own "twenty years of deflation", and the Fed's crazy interest rate hike.
And a powerful economy like Japan will face a crisis, which also sounded the alarm for China.
Fortunately, after experiencing a certain degree of depreciation, the RMB exchange rate against the US dollar has stabilized. Although China has depreciated against the US dollar, it is still relatively stable against other currencies, such as the euro, and even has risen.
Central Bank believes that the RMB exchange rate will continue to remain stable
This is the resilience of the Chinese economy and the Chinese RMB exchange rate. Our basic market is much more stable than theirs!
With the introduction of dozens of China's economic stimulus policies, we have gradually restored the normal operation of the economy. In 35, China's foreign trade surplus reached 502.89 billion yuan, a sharp increase of 79.1%, which is an example.
In May, China's trade surplus reached 502.8 billion yuan, a sharp increase of 79.1%
. With the control of the domestic epidemic and the recovery of the economy, our subsequent development momentum will be more sufficient.
Japan is facing a crisis, the Asian currency war begins at any time, and inflation in Europe and the United States is serious. Once we completely resolve the epidemic's harassment on the economy, then China may be the only economy in the world without major problems.
Now is the perfect time for us to catch up with the United States!
And this is the perfect time for us to work hard to catch up with the United States! Come on, China!
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