Is Japan careening towards a currency crisis? Buckle up, because the signs are ominous, and the consequences could be dire if the Federal Reserve doesn’t reconsider its stance on rate cuts.
Since the dawn of 2023, the Japanese Yen has plummeted a staggering 14% against the mighty US dollar. But that’s just the tip of the iceberg. Zoom out, and you’ll witness a chilling freefall—a 33% nosedive since 2021 and a jaw-dropping 51% descent since 2011. The Yen’s collapse isn’t a fluke; it’s a chilling harbinger of deeper systemic issues.
With a government debt-to-GDP ratio nearing an eye-watering 250% and a total debt-to-GDP ratio soaring to a mind-boggling 450%, Japan’s fiscal predicament is nothing short of alarming. Despite Japanese government bonds masquerading as a pillar of stability on paper, the truth is stark: they’re hemorrhaging interest payments faster than you can say “economic crisis.”
And why does the Bank of Japan hold nearly half of these ticking time bombs? Simple: to artificially suppress interest rates. Even amidst the most significant global tightening cycle in recent memory, the 10-year Japanese bond yield languishes below a measly 1%.
But here’s the kicker: unsustainable debt levels propped up by unprecedented monetary policies come at a steep cost—a massive devaluation of the Yen. Take a closer look, and you’ll see the true extent of the Yen’s debasement, not in stock indices or fiat currencies, but in the unyielding measure of gold.
While mainstream media fixates on superficial indicators, the real story lies in the erosion of Japan’s currency value, a symptom of deeper economic malaise that threatens to send shockwaves across the globe. Brace yourself, for the storm is coming, and it’s far from over.
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The Bank of Japan will panic, force a significant squeeze on the Yen, and that will spark the reverse carry trade.
If you think this is over just because of last week, you’re out of your fucking mind.
It’s coming. t.co/kglgyck1YL
— Michael A. Gayed, CFA (@leadlagreport) May 7, 2024
Is #Japan heading for a currency crisis? Things may get ugly if the #FederalReserve does not reopen the door to 2024 rate cuts. A 🧵.
Since the start of 2023, the Japanese #Yen is down 14% against the US dollar. pic.twitter.com/XSDiClkWoi
— jeroen blokland (@jsblokland) May 7, 2024
USDJPY
Here we go again .
40 + 40 Billion intervention fruitless.
Next 200 billion ? pic.twitter.com/8i3qeecSjm
— The Great Martis (@great_martis) May 7, 2024