Will Japan Widen Its Size And Trigger A Currency War?

The reason why the global market is surprised is that Japanese central bank governor Kuroda Higashihiko also boasted that the Japanese version of the volume policy had already created the expected effect when he made a public speech at the New York Economic Club in October 8th. The Japanese economy will be able to get rid of the short-term impact of the excise tax increase and continue to move towards the road of recovery.

Kuroda Higashihiko's move to expand the scale and scale in October 31st is no doubt self destroying reputation and self talk. Kuroda Higashihiko is so bold, I believe that it is not just to reduce the concussion of the international financial market after the withdrawal of the Federal Reserve policy, but also to save the current weak Japanese economy.

As you can see, in April of this year, after Japan increased its consumption tax, not only did the economic growth go down, but also the inflation rate was further away from the target of 2%, and there was a danger of falling into deflation. Under the pressure of the Andouble administration in Japan, Kuroda Higashihiko had only chosen to expand the scale.

However, the behavior of Japan's crazy money printing is actually beggar thy neighbour, not only in the next few months, it is likely to trigger a currency war between Japan and the United States, and may also lead to a new world financial crisis.

　　 Us or Japan launched currency wars

The reason why Japan is expanding its size and scale is likely to trigger a currency war in the US and Japan. That is because the Bank of Japan has been expanding a lot of money in a big way. In fact, it hopes to intervene the yen exchange rate by increasing the yen supply to reduce the yen's exchange rate against the US dollar and the euro.

Because exports are related to Japan's economic lifeline, only the rapid growth of exports can stimulate Japan's economic recovery and rescue Japan from the mire of "lost N". Japan's idea of increasing exports is good, but it is not difficult to achieve it, and it will also lead to currency wars, especially the currency war with the United States.

The international trade in the modern world is far from the "comparative advantage theory" of classical economist Ricardo, which is as simple as cotton for grapes. Moreover, we should also note that the products produced by Japan and the United States in automobiles, electronics and other industries are very homogeneous. The two are no longer the same trade as they used to be, but they rob the global market each other.

If Japan wants to increase exports, it will become the only option to lower the yen exchange rate. In this case, Japan has allowed the yen to depreciate and increase exports so as to grab the global share of US exports. Obviously, the United States will not only be glad to see it, but it will almost certainly fight back.

Apart from the fact that the United States has always opposed other countries' manipulation of currencies, especially lowering the exchange rate to promote exports, after the withdrawal of the QE policy by the Federal Reserve, the US government also hopes to stimulate the economic development by attracting the manufacturing industry to return to the United States and promoting the export increase of the United States. Under such circumstances, the US government will never be willing to see that the US dollar is too strong. Its currencies such as Japan and the euro are too weak, thus pushing up the cost of us business and reducing the competitiveness of us commodity exports, resulting in an impact on the US economy.

Therefore, the Japanese central bank will intervene in the foreign exchange market by expanding its quantitative scale. Then the US will also tit for tat in the future, and further intervene in the US dollar exchange rate through various means such as finance, economy and diplomacy, so as to devalue the US dollar and promote export growth. At that time, the Japanese and American monetary war is very likely to start.

What is more serious is that the Japanese government's reckless expansion of a wide range of actions, in addition to bringing the Japanese debt crisis to the abyss, is more likely to trigger a new round of world financial crisis.

　　 Japanese debt crisis It can sweep the world.

Why do I describe Japan's expanded quantitative easing policy as "reckless"? We can see that the United States, which also implements quantitative easing policy, accounts for only 0.6% of the gross national product of the United States in the past $85 billion, but its economic strength is far inferior to that of the United States. Its debt scale accounts for about 2% of Japan's gross national product, accounting for about 3 times that of the United States.

The reason why the United States can vigorously implement quantitative easing policy and has the ability to become the world's largest bond nation for a long time is because the US dollar becomes the world currency under the background of the super military and economic strength of the United States. The world usually needs dollars at the same time. When the world is in turmoil, it needs us dollars more, so the US dollar exchange rate can be strong, so the United States is bold enough to be wide, wide and wide.

However, Japan's military and economic strength, which is difficult to compare with the United States, is much larger than that of the United States. It has triggered the yen exchange rate to fall more than 20% against the US dollar over the past year. With Japan's more frenzied expansion of the quantitative scale, it will no doubt cause the Japanese yen to continue to fall against the US dollar. The sharp depreciation of the yen will seriously damage the market's confidence in the yen and Japanese debt. Japan's domestic investment institutions and nationals holding more than 90% of Japanese bonds will shrink their assets because they are not reconciled to the devaluation of the Japanese yen. They will continue to sell Japanese government bonds and invest in overseas markets in the future.

Japanese government bonds have to be sold after sale to attract investors to raise their yields. The yield of Japanese 10 - year treasury bonds has risen from less than 0.4% in early 2013 to about 0.45% now, rising by about 0.05 percentage points. The yen will further devalue in the future, and yields on Japanese bonds will not rise gradually, or even rise to around 1%, which will push Japan and even the world into a crisis.

Japanese bond yields are rising rapidly. On the one hand, Japanese finance will be dragged down. In 2013, Japanese government bonds amounted to 1017 trillion yen, and in 2014, it was expected to reach as high as 1800 trillion yen. Japan's 10 year Treasury yields increase by 0.1 percentage points every year, and the Japanese government's annual interest expenditure will increase by more than 1 trillion yen. The increase to 1% will increase to 10 trillion yen. If the yield of the 10 year treasury bond goes up to 2%, the Japanese government's revenue may have to pay interest.

On the other hand, it will trigger banks. System crisis 。 At present, about 80% of Japanese government bonds are held by Japanese banks. The Bank of Japan has long warned that the interest rate of the Treasury bond yield will rise by 1%, and that the Japanese banking industry will lose 6 trillion and 700 billion yen. If there is a serious loss or bankruptcy of Japanese banks, it will undoubtedly lead to the financial crisis in Japan, and even trigger the global financial crisis again.

　 Wall Street has made the worst plan.

For this risk, the US Wall Street has made the worst plan. Information shows that Wall Street is continuing to buy Japanese government bonds credit default swap (CDS), triggering a gradual rise in the price of Japanese CDS in the past month. The rise in CDS prices of Japanese government bonds indicates that the market believes that the possibility of future credit default in Japan is increasing, indicating that Wall Street has prepared for the day when Japan's debt crisis broke out. Wall Street's "bond security corps" is also eyeing it, hoping to replicate the "2 years and 3 years ago" crisis in the European debt crisis, and gradually push up the yield of Japanese bonds, hoping to lead to the Japanese government's inability to repay bonds, triggering the largest possible sovereign debt default in history.

Japan's wider and wider scale also made international hedge funds more interested in the yen. Now that the yen continues to depreciate, hedge funds will undoubtedly borrow large amounts of cheap yen to invest in currencies and assets with higher returns in other countries and regions, which will lead to more flooding of funds from Japan. The first to bear the brunt will be emerging market countries. Under the attack of hot money, the stock market and property price bubbles in emerging markets will go higher and higher. And when the bubble is broken, the greater the bubble, the greater the risk of blasting, and the heavy losses for all countries.

It can be said that the Japanese government's current QE policy is actually a desperate gamble. If the Japanese government wins the bet, it will bring more and more bubbles to the property market and stock market of the emerging countries. If the Japanese government loses the bet, the bubble will burst and the cost of the global economy will be greater.

History often repeats itself, especially in the history of world finance. The world financial crisis, which started from the US stock market crash in 1987, followed Europe and Asia. The game will be staged. The first American debt crisis in 2007 triggered the global financial turmoil, followed by the European debt crisis. Now, because of Japan's reckless madness, it will expand the scale of quantitative easing, coupled with the aging of Japan's population. Savings rate It is hard to keep up with the decline of financial revenue, and international investment institutions are grinding their weapons to prepare for sniping the Japanese debt market and financial market. I am afraid that in addition to triggering the currency war between Japan and the United States, Japan is likely to become the chief culprit of detonating the next global crisis.

For China, in addition to preventing the impact of Japanese hot money on China's capital market and the impact of the devaluation of the yen on China's exports, China, as the largest overseas holder of Japanese government bonds, should take precautions against Japan and gradually reduce its holdings of Japanese government bonds to avoid excessive losses.