There is a saying at the moment that the biggest financial risk in the world may not come from the US, but from Japan!
Japanese government bond futures tumbled, triggering circuit breakers twice in their biggest one-day fall in nine years. Experts have warned that markets are nearing the limits of the Bank of Japan’s single-minded quantitative easing. Japan is the world’s third-largest economy. If the yen continues to depreciate, Japan’s national debt continues to fall, there will be the risk of national debt default. A Default by Japan would send a tsunami through global financial markets. Deutsche Bank warned that Japan’s financial markets were at risk of a systemic collapse.
The yen hit a 20-year and four-month low against the dollar, falling to around Y134.5 at one point. Some analysts pointed out that the recent weakening of the yen is mainly due to the widening of the interest rate gap between Japan and the United States. The Federal Reserve, which is struggling to contain domestic inflation, is widely expected to decide to raise rates again at its Federal Open Market Committee meeting next week, while the Bank of Japan is expected to keep rates very low and maintain massive monetary easing at its policy meeting next week. Yen selling accelerated, among other things, on the view that the dollar, with its higher interest rates, is better for investors.
According to The Securities Times, the recent performance of The Japanese stock market, currency and bond market has been somewhat miserable, especially the weak performance of the currency and bond market, usDJPY exchange rate has reached the 135 level, the market is currently widely expected to 140 has been a lock. One analysis suggests that the current global financial risks may come from Japan rather than the US.
Japan is the world’s third largest economy. If the yen continues to depreciate, Japan’s national debt continues to fall, there will be the risk of national debt default. A Default by Japan would send a tsunami through global financial markets.
From the current situation, Japan’s pressure comes from two aspects: one is the continuous appreciation of the US dollar, which has a great impact on the Yen; Second, the global inflationary pressure continues to increase, which will also have a great impact on resource-poor Japan. Although Japan’s overseas investment scale is relatively large, in the current economic environment, their overseas investment is likely to be greatly affected.
The yen’s decline has accelerated this year and is now at a 24-year low. The yen traded at 134.59 to the dollar, down 0.88%.
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Post time: Jun-22-2022