Japan holds a huge amount of US treasuries, and I guess was considering a mass sell off to raise cash to defend the Yen.
US treasury bond yields are already dangerously high for the US and Japan selling treasuries would push yields up even higher, and could trigger more panic selling from others.
I guess this is Bessent's scheme to try and kick that can down the road.
Qe, yield curve control or possibly other market operations. There won't be any real consequences, it's just an asset swap. They buy bonds and in turn create new interbank reserves.
Setting aside the obvious fact that the BOJ does not buy oil, they’ve been engaged in a (futile) currency defense scheme since long before the Iran conflict. This is purely about the interest rate spread.
The devaluation of the Yen against the dollar (from the typical 110:1 to these days 150:1) started around 2021 and has been a source of angst in Japan for quite some time. People were complaining about it constantly when I was last in Tokyo in December 2025, when oil was at $70/barrel.
The devaluation didn't really get out of control until 2022 IME.
In 2021 you were still able to divide by 100 and not be far off in conversion. Typically traded between 105 ~ 115.
Nowadays the Yen is so weak that I unconditionally convert my whole paycheck to USD after paying rent. Even if risk-free interest rates between Japan and United States converge, there's just not much reason to hold Yen if you want to avoid losing purchasing power to inflation.
e.g. I can risk money in NTT stock for a meager 3.0% dividend yield. Or I can convert to USD and keep the cash in my brokerage account, where it earns 3.4% interest. If I want to raise the risk to similar levels as the NTT stock, I would be looking at utility company ETFs yielding up to 7% for the past few years. Of course, there is foreign exchange risk (e.g. 10% move down in USD/JPY and a year's worth of carry trade gains are eliminated). But if the fundamentals were there for a stronger Yen, then intervention wouldn't be necessary. So for now I'm exposing myself to FX risk for the chance at getting marginally better wealth preservation.
As someone who hasn't followed this closely, when/why did things switch? Japan had the opposite deflation problem for years (decades?) and IIRC tried battling that with "money printer go brrrr" for a long time. How did inflation become their primary problem?
- External sources of inflation: COVID global inflation raises price of imports, same with Russia v. Ukraine global inflation.
- Post a few up is way too aggressive about completely dismissing Iran conflict inflation/gas. It matters, big time, and specifically for Japan, it's a 3rd thing to add to above external sources of inflation.
- They held interest rates while ex. US hiked them, also making currency less valuable. (intentionally, and a good idea)
FWIW this isn't necessarily a bad thing, for Japan. It broke the dam of stagnation.
It is more unusual that the US did this than that Japan's currency depreciated.
My $0.02: the backstory starts with the bonds boys not liking the new fed chair. Long term USD interest rates spiked big time this week, after his press conference, not after the announcing they weren't hiking rates.
If they allow another spike due to dread of Japan dumping Treasuries, you might suddenly have a crisis
(your source: 38 yo, BA in economics @ 22, who kept up with economics nerdery along the years)
My understanding is that Japan experienced the same kind of phenomenon that is unwinding in the US right now.
As long as your markets and tax policy are vicious enough that lots of normal people can barely make ends meet, you can print as much money as you want and it won't show up on the CPI. Instead, if you funnel that money to rich people, it will show entirely as growth in the price of investment instruments.
At the same time, you will have great economical indicators, and even large taxes that can be spent on anything that doesn't end up on the population's bank accounts (like on infrastructure).
But that money keeps piling up on investment, making them more and more distant from normal cost of life expenses. As soon as any of it reaches normal people, the CPI explodes.
Do you think the USD inflation will be less than 0.4% above the JPY inflation? I mean, the USA has basically just admitted to us they feel they're on the precipice of a bond interest death spiral, which will cause hyperinflation when they print money to end it.
Investor fears about rising oil prices and how Japan’s Prime Minister Sanae Takaichi can afford her fiscal stimulus plans recently pushed the yen towards 40-year lows
That line is worth exactly as much as the daily financial news quote “explaining” why the stock market wiggled in a particular direction yesterday.
All of those things have some impact on “investors” thinking at all times. They do not uniquely explain the current events. Japan has been defending the yen like this since at least 2022.
It's kind of ironic how Stephen Miran's strategy of "to hell with the rest of the world, we do what we want" keeps running into electric fences. They want to devalue and inflate the dollar, but the Horse in the Hospital keeps ruining the plan.
It’s all just a bunch of childish short term thinking. Granted this administration doesn’t care as long as they get theirs. They just blame anyone else as things come and go.
I think so many in power now, including lots of people in tech, have bonkers, cartoonish views of the world that just don't map to the reality and complexities of the 21st century. Scary stuff.
It's about propping up the yen in foreign exchange terms, so the essential operation is buying yen with dollars to increase the price of the former in a standard microeconomics way.
US bonds happen to be the assumed-safe sink where central banks store their dollars for this eventuality.
Currency interventions never work. They buy a bit of time maybe, but without any fixes to the underlying causes that made the intervention necessary, its a temporary solution.
Where did you learn that? It doesn't reflect the structural volumes present. Central banks make interventions all the time in line with little stabilisation programs. Those are almost always deemed success.
Maybe you deduced it by yourself? If so, fx is weird despite traditionally being seen as the simplest area in finance. E.g. It's counter-intuitive but we tend to think trade make up most FX volume globally. It's in the area of less than 3%. The majority by far is speculative and hedging.
The other trap is fx volume, people assume the know what volume is but then they learn expressions of fx volume is almost always actually tick volume.
It works very well in rich countries, but it is expensive, especially if the volume of exchanged currency is low. This is one of the reason behind the Euro, countries realised it would be way less expensive to defend the currency if they banded together. This is also a big why ex french colonies keeps colonial money, because that currency is pegged to the Euro and that peg protect it (the only way to get out cheaply is to do a West African Union or something similar, which is why anti-colonialists are big on the subject. They are right).
This is literally what central banks do. Central banks influence the economy with monetary policy, including things like this. That's all they're allowed to do, since they're intentionally not a political institution and have no legislative or executive authority. If you want the root cause to be handled, that's up to the legislative body. That's not the central bank's job.
This would be a dumb move. If Japan's treasury started selling a large amount of US debt, the Fed could buy it up and pay interest to itself.
Japan would then have a whole bunch of non-interest-bearing US dollars and the Fed would have a lot of interest-bearing US bonds.
Now it's true that Japan's treasury could then use those dollars to buy something else like stock in US companies but they could have done that all along anyway. They bought the debt for the coupon payments.
What's actually happening here is what it looks like: Japan's economy is starting to seize up due to the Iran war. Since they have to import all their oil they're suffering from a currency crisis (they can't export enough to balance payments on their oil bills). The US is stepping in to support them because 1) Japan's current government is allied politically with Trump and 2) Japan's an important geopolitical ally that is being hit very hard by the Iran war.
> Japan would then have a whole bunch of non-interest-bearing US dollars
They would not be holding the dollars long enough for the interest to matter. Those would instantly be traded for JPY, weakening the dollar and strengthening the yen, because the goal is to influence the exchange rate.
But this is what the US Treasury is doing on Japan's behalf without requiring Japan to give up any bonds. If Japan wants a stronger Yen against the dollar why not make them spend their reserves to support it?
Because Japan would sell its treasures to buy dollar with which to buy Yen, pushing the yield on US treasures even higher, speeding up the debt spiral.
Similar as the credit-swap lines for the Gulf countries: They have enough treasures to sell to cover their cash flow problems (from the blocked Hormuz), but (see above).
1. US actually bought Yen with Euros, not with dollars. The time will tell whether that will be a good trade for them.
2. What do you mean by 'No it would not'? I am not sure what are you trying to say. If Japan sells US bonds (instead of, as usual, buying), the aggregate demand for US bonds will go down, raising the yield. It seems that that is what the US is trying to prevent.
Either they spent euro reserves or bought euros with dollars so that's kinda irrelevant.
This thread kicked off with an incorrect belief that Japan had leverage over the US with some threat to spend reserves. That leverage doesn't really exist because it can not have any more effect on the American fiscal position than the one the Treasury just took.
In fact the Treasury is helping Japan maintain a stronger fiscal position by not forcing them to liquidate reserves to protect the yen.
Instead the Treasury is using it's own balance sheet to protect the yen which is bonkers from a monetary "america first" perspective and it only makes sense within the context of the Trump administration protecting the Takaichi government from a crisis caused by Trump's war in Iran.
Anybody with large enough holding of US treasuries has leverage over the US: Large selling of those treasures will raise the yield on them, which is the last thing the US in its current situation needs.
Of course, such selling will crash the treasuries, incurring huge losses to the seller. Still, hoping/pretending there is no leverage is closing your eyes to the reality.
Reciprocally, US has capability to screw over such large holders by inflating itself out of debt, leaving them holding worthless paper/bits.
That's why China has been carefully riding itself out of treasuries for years.
> Anybody with large enough holding of US treasuries has leverage over the US: Large selling of those treasures will raise the yield on them, which is the last thing the US in its current situation needs.
No Japan or China or anyone else who owns treasuries can not control the yield on the US Treasuries because that is controlled by the Fed. The Fed has near infinite power to intervene to make the treasury yields be what they want.
If a country had a lot of US reserves they could increase the supply of dollars on the international markets through a lot of selling. But this is essentially what the US treasury is doing by using dollars to buy yen (with an extra step through Euros to make it more politically palatable)
Your mistake is assuming that the dollar supply and the treasury yield isn't a slider that can be zipped back and forth by the Fed.
> No Japan or China or anyone else who owns treasuries can not control the yield on the US Treasuries because that is controlled by the Fed. The Fed has near infinite power to intervene to make the treasury yields be what they want.
No. The yield is determined by what the buyers demand.
The Fed can distort the market by buying treasures themselves.
But that is not near infinite power.
It fuels inflation and reduces credibility -> investors demand higher yields anyway. It can use other tricks (like 'leaked' Besson's memo), but those also have their limits.
> The yield is determined by what the buyers demand
Your mistake is misunderstanding the power central banks have in managing these assets. The Fed can make the yield whatever it wants. The Fed potentially has reasons to let the yield be high but it's a choice.
> The Fed can distort the market by buying treasures themselves
What you call "distorting the market" the Fed would call something like "setting the parameters of the market".
Regardless if you're ideologically opposed to the Fed actively managing the market for treasuries. The fact is that they can, and they do.
> inflation and reduces credibility
So you admit that the Fed has this power but they just choose not to exercise it? In any case, the Treasury's actions "fuels inflation" every bit as much as any intervention the Fed might take in the bond market.
Yield is determined by market demand, overwhelmingly by institutional (central banks) who were marginal buyers, i.e. when USD was geopolitically safe, countries/central banks would buy without question for liquidity which artificially lowered rates. Now US fucked around with USD geopolitics, institutional buyers crowding to gold/commodities leaving private buyers (hedge funds etc) to fill demand hole, and private buyers demand higher yields because they buy for returns not liquidity. This why US debt servicing exploding - FED selling to more discerning market buyers and less to unquestioning institutional buyers.
Where PRC comes in is they have large amount of USD reserves (and shadow USD from trade) used to parallel lend to governments (BRI etc) which replaces marginal FED USD demand with recycled PRC USD supply, which forces FEDS to find more market buyers, by increasing rates further to clear auctions. Every USD from PRC reserves that goes towards bilateral lending is one not bought from FED that has be be replaced by market buyer at higher yields. Net effect is PRC has functional influence over US treasury yield. Now fed has infinite power to move slider to compete on yield... but in practice that slider can only go the direction that makes US debt servicing more onerous. PRC leverage (JP limited geopolitically) = FED has little power to reverse debt trap but some power to go broke faster. Some power because at some point of $$$ brrrt printing buyers will realize US may not be able to honor commitments and price risk accordingly.
- the fiscal position (the amount of debt the US owes) does not change by Japan selling the US treasures to other (non US) party
- but the party that bought the treasures from Japan will not be buying them from US, hence diminishing the demand for them, therefore raising the yield
* Japan liquidating its reserves to protect the Yen and its effect on US treasury yield or anything else can easily be undone by the Fed, if so desired. With an impact on the Fed's balance sheet for sure, but at a cost to Japan of liquidating its reserves
* Instead the US Treasury intervened to protect the Yen, allowing Japan to maintain its reserves while there still ended up being balance sheet consequences for the US
They have the option of simply putting it on their books, but that is the very last option.
They would rather borrow it. Sometimes they borrow it from themselves at artificially low rates, which is still better than simply not treating it as a debt at all.
Their preferred option is to auction off bonds. Though just at the moment rates on those bonds are extremely high, because reasons.
It's a big world. There are a lot of places to buy oil from. And the balance of payments is not that complicated with energy - like where do Middle East OPEC members reinvest their dollars? In world assets. Like Japanese companies.
IMO, the far more impactful geopolitical conflict is still the war in Ukraine, between two countries with allies that actually have deep ties to the rest of the world, with casualty counts exceeding a million people.
But nonetheless the problems there, in Japan, are the same that generations of Japanese have already identified as a big problem, predating the fall of Bretton Woods or whatever modern top down policies: the patriarchy, nepotism and xenophobia... Many similar problems to the West. You cannot bank or math your way out of a suffocating patriarchy, which is to say, the humanities people have always had a bigger impact on our day to day lives than the people crunching for Jane Street interviews.
> I guess this is Bessent's scheme to try and kick that can down the road.
This can be summed up policy for pretty much every single administration since I've been alive. For almost every single massively looming problem - financial, domestic, and foreign policy. Various degrees of can kicking I suppose, but the can shall be kicked regardless.
Yes but this administration was essentially elected on the idea that they can be horrible people and do horrible things because they will not kick the can down the road, and biting the bullet on these problems is worth the litany of abuses of our nation and our allies.
Turns out it's just the worst of both worlds.
Higher debt, more foreign intervention, slower growth, higher inflation, and our upper echelons occupied by people with no semblance of, or even gesture toward, personal character.
American voters exist in an environment of propaganda addiction, with every piece of their personal technology reinforcing and profiting from said addiction, that has never existed before. I have great empathy and understanding for those who are bombarded by voices that are actively manipulating them for engagement, and I believe this empathy is key to understanding if, and how, a landscape of echo chambers can nonetheless result in a sustainable and balanced future.
(edit: see below for my response about the limits of this)
Understanding, absolutely. None of us are immune from propaganda, and most of us have at one time or another been swayed by selective arguments and echo chambers to behave poorly.
I don’t like that you have empathy for people who are right this second steering the government in a project of performative cruelty against me. I think you should withhold your empathy until they’ve been stopped and appropriately punished for their misdeeds.
To be very clear: there's a difference between the people shaping/benefiting from/profiting from this system, and those being shaped by it. And, without sharing too much personal info, I am very much one of those being attacked by such a project of performative cruelty, and far too many people I know and love have suffered - and the architects of these projects must not escape accountability.
But I have to believe that a sizable number of people exist out there: the ones who have not carpetbagged on the ragebait economy, but who have been the ones taken down an algorithmic video-feed rabbit hole primed because of the news channel playing at their workplace or words of hatred shared by a community leader... that this person has been taught to fear rather than understand, that that person still has the innate capacity to understand, and that a future can be built on that capacity.
I think that winning (and retaining political advantage over time) is probably a prerequisite for enacting any punishments, much less correcting other issues.
Uhhhh... sure...? Are you implying that "the other side" will never again hold power? Because that's a very silly view, if so.
I'm quite sure the single most popular platform someone could run on today is simply "aggressively prosecute every single crime committed by the MAGA apparatus."
Punitive campaigns seem to work best with the right wing base. There’s a large squishy center (and a sizable segment of the left) that doesn’t vote when things go too negative.
If you want to contrast with a real world example, Obama won as an unknown candidate running on “hope and change” despite racial bias.
But it’s probably better to lose if presenting a positive message would make you feel icky.
Yeah nah this is way too reductive. You'd need to share a much more thorough analysis than just "here are three candidates criticized for things that are arguably adjacent to angry/negative vibes"
For example, Harris ran on a positivity campaign and lost.
There are just way, way too many dimensions to modern politics to resolve into something like this – with the exception of the anti-MAGA sentiment which is widespread, highly salient, and highly motivating. Obviously that's fleeting and so in 16 years it will probably be wrong to say "anti-MAGA candidates always win, just look at 2028!"
Well you should try it then. The right wing is doing a better job of disassembling the empire anyway, inadvertently, so I don’t mind too much if they win again.
(FWIW the Dems had an internal report after ‘24 that mostly agreed with me.)
Well thanks for confirming you're just making shit up from whole cloth.
The Dems' 2024 report literally argues the opposite, over and over. It argues that Democrats did not engage in enough negative campaigning against Trump.
> LESSONS FROM THE STATE CAMPAIGNS
1. Going Negative Works (Especially if Voters Know You).
> The Trump campaign and supportive Super PACs went full throttle against Vice President Harris, but there was not sufficient or similar negative firepower directed at Trump by Democrats.
> Voting is a choice. And negative messaging needs to be a part of the story as choices are framed
for voters.
> The Harris campaign appears to have relied on Trump being unacceptable rather than building
an affirmative case for Harris. Base voters needed reasons to vote FOR Harris as well as against
Trump. Without an effective contrast with a difficult (and unaffordable) status quo, the obvious
contrast with Trump was not a sufficient motivator, especially since there was not sufficient
negative messaging about how horrible Trump was (and still is) for and to most Americans.
> Define lanes for communications ecosystem. Who will carry contrast and negative
messaging so candidates go high as other entities go low. This was a major failing in 2024, and it cannot be repeated. Set the lanes and hold organizations accountable.
Ah, I had read a source that characterized it this way, but the truth is more complicated. The report itself said this, but it reflected only the view of the author; the notes from Dem leadership on the report disputed this point in particular and said there was no evidence for it. Apparently they disagreed with the report’s conclusions enough to suppress the release for a while.
I misremembered this and a quick search to remind myself wasn’t adequate. Given the disagreement around the report, I don’t think it serves as a good source either way.
Digging a little into it, the research seems to indicate that there’s not adequate evidence to draw any conclusions: https://link.springer.com/article/10.1057/s41253-019-00084-8. Although there’s some evidence that negativity demobilizes voters and degrades democracy, which you probably don’t want. But I don’t really care who wins anyway, I’m not sure why I’m even engaging here. I guess I just want the 2008 Democratic party back.
As I said earlier, Republicans are doing a pretty good job of dismantling the empire, and I care about that more than whatever either party is offering domestically (not much). So if they win, so be it.
2008 Dems had a large “liberaltarian” presence, which isn’t perfectly aligned with my views, but it was close enough that I was often in favor of their policies. Current Dems just want the war machine to focus more on Russia while sticking it to red states at home.
Antiwar sentiment in the party died after the entry of “CIA Democrats” like Spanberger, who now have outsized influence within the party. I don’t see much good coming out of a Dem victory until they are expelled.
"Current Dems just want our country to honor its commitments" is quite a criticism!
Maybe I'm just some war hungry lunatic, but I actually think that when the US tells a country it will defend its sovereignty in exchange for it not having nuclear weapons, it's very important that we honor those commitments.
That's probably because I prefer deterrence, and intermittent war required to assert deterrence, more than I like the idea of every nation in a race to build nuclear weapons and then every neighbor doing scrambling to prevent nuclearization. Basically a warmonger then ¯\_(ツ)_/¯
You also probably believe in strong regulation of the internet (including possibly ID verification), open borders, and other positions I don’t accept.
As I said, I’m not a fan of the current party, and I hope that the right continues to degrade state capacity until neither side has much left to work with.
No, I actually don't. I always find it surprising when people not only just internally start ascribing irrelevant and probably-untrue things to their interlocutors so they can dismiss their ideas, but they actually say it out loud!
I don't understand what my prior comment has to do with any party at all. It was a direct response to your implicit claim about the US's obligations to Ukraine, and therefore to the rest of its security umbrella.
Well then you wouldn’t be in alignment with the mainstream of your party, who does seem to want that, at least if you look at blue state legislation.
As to how it has to do with the party, we were discussing the Democratic Party, Russia was a brief aside. But I do find that people’s position on the Russia/Ukraine conflict typically tends to say a lot about their other positions.
Can you identify specific blue state legislation that creates or attempts to create open borders?
Are you referring to sanctuary policies which just say a locality won't expend local resources to enforce federal immigration law?
Not sure what you could possibly be referring to here.
You're aware that actual open borders is an extremely, extremely fringe position, right? The borders between US states are "open borders." Support for open international borders is unbelievably rare, across the entire political spectrum.
Increasing gas prices seems very well correlated with people not voting for the incumbent party, and I can't imagine these people not feeling they're being punished by the price, so ...
... yeah I'd say punishing the people can make them vote for us, or at least not vote for not-us, which is basically equivalent.
I don't accept the idea that e.g. Greg Bovino should be allowed to have brownshirts murder people in my city as long as enough voters support him. I reject the legitimacy of any political system that can't or won't punish him for his crimes.
I do have a lot of faith in democracy, so I'm optimistic that most people can be persuaded to accept his punishment if the argument is presented well. I'm sure some number of people who called for him to murder people will pretend they were never on his side, and that'll frustrate me to no end, but such is life.
There’s a difference between wanting to punish the officials responsible, and wanting to punish the people who elected them. In the context of the broader discussion it sounded like you were advocating for the latter, which isn’t a winning strategy. But even if you only mean the officials, punishment is a bad centerpiece of a campaign; it’s something that one should do quietly after you have already won.
(The exception is right wing politicians, who seem to be allowed to win elections while openly calling for punishment of their opponents. Call it a quirk of the US electorate, or a flaw in human nature, who knows. It is what it is.)
No, it's the idea of "getting in their minds" and understanding what their perspective must be from the inside that I object to. It's not the right time for that. If a bully starts punching the guy who lives one house north of me, I need you to help get the bully off of him, not start theorizing about why bullies act this way and why people might support them.
Who is the singular bully in this analogy? It seems to me the choice is between "civil war" and "influencing people to vote differently" -- the latter of which requires understanding them (for example, the common theme seems to be screaming "change, any change")
It seems to you incorrectly. The President of the United States is going to declare a civil war when he loses the 2028 election, perhaps as soon when his party loses the 2026 election. There's no choice we have in that, only in how we respond.
> I believe this empathy is key to understanding if, and how, a landscape of echo chambers can nonetheless result in a sustainable and balanced future.
That ship has sailed. This administration is reinforcing that it is okay, even something to be celebrated, to be doing violence to those that they dislike, for whatever reasons. It is not mere parroting of propaganda that is the concern, but the consequences thereof. There is no "sustainable and balanced future" in that.
I have had arguments on this very site where I've been told that -I- and others like me are at fault. At fault for having exhausted tolerance for people peddling things like "after-birth abortions" (Did you know that in some Democrat states you can have an abortion up to 30 days after the baby is born?!?) and similar absolute garbage. Not even "differences of opinion or perspective". I've been told endlessly, "Maybe I need to put more effort into why they think or feel that way?" That won't work, because I'll be the only one. It's never "maybe they should think about why I think that's absolutely ridiculous". There's no effort on critical reasoning or discourse that will work there, because it's not grounded in reason in the first place. And when that comes up, crickets. But no, keep going high, keep working on empathy for people who actively celebrate LE shooting people, a President that will say from the Resolute Desk in the Oval Office, quote, "My kids are insider trading all the time".
That ship has sailed. I'm not sure where it goes from here, but my fear is somewhere even uglier.
I am certainly willing to accept, and empathize with, people being bombarded by political propaganda that leads them to stupid ideas. There is no shortage of this, across all political stripes.
What I will decidedly not accept is when people steadfastly refuse to listen to their fellow citizens' criticisms of their chosen propaganda, but instead go on the offensive attacking anyone who deviates from it - even when people are trying to engage with them using their own stated preferences regarding morals, rights, economics, etc! This is the highly toxic dynamic underlying the actual division, and is exactly what enables the negative-sum con job based around vice signalling.
We as humans have to accept that systems operating on this scale have no other options than kicking the can down the road.
Like, throw the global economy into a 5-10 year depression is not an option, despite the fact that clearly it is what the economy needs in terms of a reset.
There is a very real possibility going down that path could cause an irreversible deflation spiral.
So the safer option must be chosen even if it creates mass wealth inequality and a different upwards inflation spiral which at least they can control
The Treasury’s intervention to bolster the yen is the first since 1998, when it bought the currency in order to strengthen Japan’s economy after the yen had dropped to eight-year lows. The US intervened in Japan’s currency in 2011 to weaken it as part of a co-ordinated international effort to prevent a dangerous currency appreciation after the Tohoku earthquake and tsunami.
(From TFA.)
The Asian Financial Crisis of the 1990s was one of several that occurred during that decade (also: the recession triggered by the 1st Gulf War 1992, the Mexican Peso crisis of 1994, the Russian financial crisis of 1998, and arguably the post-dot-com bust in 2001, stretching the decade just a tad). For those present at the time, the dot-com boom was a short-lived (though extravagent) interval, beginning in late 1998, spiking early 2000, and crashing out in early 2001.
The start of the dot com boom I would mark at August 1995 when Netscape’s IPO was the most successful IPO to that date.
But really I mark it with the IETF RFC 1290 “There’s Gold In Them Thar Networks” in 1991.
But yes, the 21st century was defined in 1990’s. Everything since is derivative. I feel sad for those born after everything worth doing had been done already.
Bessent wrote that note very large and intentionally left it visible in hopes that it would be photographed and the market would do the work for him. If the market believes the US Government is going to spend $10B on JPY, it will happily price it right in without the US having to spend a penny.
These guys never do anything by accident, like when Jamie Dimon said "I probably shouldn't say this, but if you see one cockroach there's probably more".
You don't get to manoeuvre yourself to being the head of JP Morgan by starting sentences with "I probably shouldn't say this" in interviews and then saying something you actually think you shouldn't say
Propping up the yen may be more helpful for the US than if Japan hikes interest rates which is on the table (Google ’bring money home‘). The carry trade buying treasuries with debts incurred in yen has been a steady source for US funding. Eventually it will happen with collateral impact on treasury rates but this ‚supportive‘ move may just shift it past November.
Yes. Let’s not forget that the last time the BOJ hinted at rate normalization, it caused a global bond market freakout, a spike in Treasury rates, and a collapse in Asian stocks (the “BOJ Shock” of December 22).
One can make a reasonable story that this led to the SVB collapse.
Japan is a what? They've been dumping billions of dollars and trillions of yen into their economy since the 1990s. How is this any different than the past thirty years of intervention? I stg you guys. I get that ginning up a conspiracy gives you agency in a powerless world but come on.
While I don't agree with the phrasing of the above comment it doesn't seem factually wrong?
The article states similar coordinated currency manipulation (to instead weaken the yen) happened in 2011 after the Tohoku earthquake. There was a bunch of mutual currency manipulation in the 1990s by the US and Japan.[1] In the 1980s there was the Plaza and Louvre accords. [2][3] And you can find more going all the way back to end of World War 2.
The main interesting difference in the current intervention is that the US is selling euros (not dollars) to buy yen.
Not really a conspiracy theory, it’s just an indicator of the underlying issues either the global economy. Yeah it’s been red for decades, it just shows there are segment of the world economy that are under high stress.
Difference is US now has its own issues which just makes the overall situation even more fragile.
No one knows for how long or what happens next, but you can’t look at things and think, eh it’s just the way it is. Things are a certain way until they’re not
We need an alternative, because a nation servicing interest on debt as its #1 fiscal line-item is historically irrecoverable #2027 #ThisTimeIsDifferent?
My proposed alternative is that we must accept (as individual nations, perhaps some even balkanized) that austerity measures are irreversible, globally. We cannot help everybody. We should not help anybody until we've helped our own countrymen/fellow-neighbors, first.
----
Even Warren Buffett agrees (and his heavily interviewed) espousing the necessity of taxing high net-worth individuals at higher rates (in his definition, $20M+ net-worth). He is not alone in Billionaires quotes similarly.
No Trillionaire has yet agreed with this statement, and fortunately this "accomplishment" must again (thankfully IMHO) wait to become precedent.
Future you might disagree with present you. But even if we disregard time, I think millions of consumers would benefit from the opportunity to have competitive markets again. If an actual economic forest fire was allowed to burn, we might eliminate some of the too-big-to-fail corruption and oligopoly that is the norm now and provide space for new seeds to grow.
The problem with this idea which is common in some circles is that most of the businesses involved are commodity or lowish margin. They likely got built either with government support or before the current margin's were a thing. Becdause you can't make a high enough ROI on building a new competitor your seeds will likely die in barren soil never having germinated. In today's markets the likely result will be increased business going to China, India, Vietnam and the like. If you're talking about banking then the worst possible scenario at a national level is that you're borrowing money denominated in a foreign currency. The adventure after 1929 was a result of deliberate policy to liquidate and let it burn.
We already have anti-trust and other regulation to manage this problem, we simply need to use it.
There's no end of competition, the world changes, companies bloat and make bad choices, smaller competitors can react and change faster - it's only in our corporate hegemony that we don't consider that a viable alternative.
Companies also learn from history, and with enough data, can make perfect decisions in real time. The end result, is you end up with “Final Companies”, where a market becomes so dominated an entrant cannot even start up, because it requires operating to even greater perfection just to stay in the game.
Hold on there. The reason you mostly see sky is falling posts is that those get more engagement, both positive and negative. "Everything is fine" doesn't cause a reaction in a reader.
This is inherent to social media. It's bad for us, too, because it eventually tricks our brain into thinking the sky is always falling, no matter how we try to talk ourselves out of it.
Curious what others think. In my small real offline world, it seems this has caused people to get worked up about the sky falling a few times and then quit paying any attention to the sky or boy crying wolf at all.
Which means when events actually happen that will have a large negative impact on their life or their descendants, they just don't care. Which then results in another metaphor - boiling a frog.
The not caring is honestly a good idea for most people. Very few people have any action they can take that will make measurable change on those negative impacts.
I'm just not sure what it could mean for a typical person, who does not participate in and is not familiar with the EUR/JPY foreign exchange market, to care about a story like this. Is there some financial decision I should be making based on this intervention? If we all got together and protested, might we convince Bessent to buy the euros back, and would that restore the status quo ante if he did? The few people who have any levers to pull here have surely been made aware of the story by now, so if the answers to all of the above are "no", it seems correct for most people not to care.
I think Peter Schiff has been beating the drumbeats of collapse since 2008. But now on the other hand, we have a rising power China trying overthrow the current system which will accelerate the process. China wasn't in that position in 2008.
Best I can do is point out that much of American economic history for the past 300 years has been stumbling from crisis to crisis, and somehow we muddle through. A good book to understand this is https://a.co/d/0aTW4L6D
That "historic" characterization has a smell of sports statistics. Yeah, that player never scored a goal in a Friday when it's a full Moon on the team's home stadium; no, that's meaningless.
The Japanese economy is changing, but that's true for any economy at any time. The world is currently in a crisis that is testing international relations, but I hope you knew that already. This one intervention doesn't add much by itself.
Here’s the likely rationale from one of the FT comments:
“It looks like the Japanese economy is on the BoJ [Bank of Japan] ventilators. I mean, the BoJ is the largest single holder of Japanese equities, government bonds (JGBs) and currency (JPY). It’s likely that the BoJ is printing more yen to finance Japan Inc, which in turn is probably the driving force behind inflation.
[…]
BoJ is the largest foreign bank holding USTs [US treasuries], around $1.14tn, it’s likely that they would have had to sell some treasuries to finance JPY purchases. My view is that, this scenario is not ideal for the US Treasury – particularly right now with the UST yield curve steepening – hence they had to “return the favour” by selling EURJPY”
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tl;dr in my layman interpretation: US helps Japan by selling (shorting) EU in a debt-exchange triangle. The US didn’t have much choice, as Japan would have sold USD, which they hold plenty of, to finance their spending spree. They just have to hope their bet on JPY vs EUR pays off in the long-term.
Yes, which bet? I agree. There's no bet here. The comment correctly outlines why the US is doing this and how it benefits. And instead of concluding that "this is why they're doing it", they're making some weird hint that they're shorting the Euro and that somehow this doesn't pay off if the trade isn't favourable or something else? They benefit by BoJ not selling US treasuries. It doesn't matter how EUR is valued against JPY. It's not a bet between these two currencies. Europe would also benefit by their currency getting weaker, since it's filled with export-heavy countries like Germany.
Not really what you asked for, but what I would say is that this specific incident isn't like some huge deal or something. It's just the USA doing something that helps Japan stabilize its currency, and helps the USA avoid a spike in people selling US treasuries (which would raise US borrowing costs).
It's unusual, but not earth shattering or crazy.
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The wider picture looks rather worrysome though. Japan has spent decades building up a nest egg of US treasuries as a way to try and fight of deflation. Now, they have inflation and currency depreciation, so the extremely natural thing to do is for Japan to sell their accumulated assets to defend their currency and dampen inflation.
The USA on the other hand has been going around with a fork and sticking it in electrical sockets, and has earned a reputation for being extremely erratic and unfocused on stability. The USA also has zero plan or intention to get its debt burden under control.
This makes investors who hold US treasuries nervous. They see increasing geopolitical instability, increasing political disfunction in the USA, and the early stages of a USA debt crisis that could end in debt defaults (Bessent has already actually hinted at this, when he suggested unilaterally converting some already sold bonds to '100 year bonds').
This situation has caused US borrowing costs to go up, and japan switching from a net treasury buyer to a net treasury seller would make it harder for the USA to sell more bonds without giving even higher interest rates, which just makes the current debt troubles worse.
As a European, I'm somewhat sensitive to that side of things, but if you look at the USD-EUR exchange rates, the Euro has only strengthened against the USD since this happened.
I guess it's just not a big enough shift to change the overall USD-EUR dynamics. Plus, I think a lot of the Eurozone wouldn't actually mind if the Euro weakened a litte, even if it'd make the current energy price problems worse.
But even if the USD did liquidate enough Euros to shift the dynamics, and if this was decided to be a bad thing, the Eurozone countries hold way more US treasuries than Japan, and could just sell those if they wanted to, which could quickly bring things back into balance, and would be a major deterrent against the US.
US sells EUR, buys JPY, BoJ doesn't need to sell US treasuries. There's no bet here. What do you mean by bet? They could be losing money on the trade and it wouldn't matter as long as they avoid US treasury yields from rising any further.
I doubt it's 'legal' per-se, but I also doubt the legal troubles would be the biggest obstacle to doing it as it'd cause an insane meltdown in the bond market.
I double checked and it wasn't actually Bessent who suggested it but Miran. This was back when he was a bigger figure, probably played a role in his sidelining.
Why would the sky be falling? Getting the world's largest economy to prop up your own economy is kind of the point to being an ally of the biggest economy in the world; the Japanese and American governments being in bed together and planning the Japanese economy is not just normal, but is one of the bigger conspiracy theories persisting from the 1980s when US intervention is blamed as the reason Japan's economy stagnated in the 90s. So I don't understand why this would be a sky is falling moment.
Because then the world's largest economy suddenly needs to de-lever to afford the oil you made more expensive. The USA government will enter a debt-interest spiral if Japan sells its bonds. There will be no recovery from that besides, maybe, hyperinflation through printing away the debt.
Doesn't mention that the Japanese would have sold US govt bonds to prop up the yen. But selling euros might force the Europeans to do just that to pro up the euro if need be. Is that a reasonable reading of things?
Euro countries hold even more US bonds than Japan does, and could sell those if they need to.
But the EU probably wont do that for monetary reasons. First, the EU doesnt really mind too much if the Euro drops in value a bit since it somewhat helps domestic industry. Second, the Euro seems to have strengthed against the dollar, not weakened since this was done.
I think if there was a coordinated selling off of US treasuries by Euro countries, it'd be to force a political concession from the USA, not to defend the Euro's value.
Japan's industries have been squeezed hard by China's rare earth sanction and global energy price. I'm not sure some financial operations can wiggle them out of the situation.
I still have the tab (open from yesterday's /hn/) about Trickle Down Economics working as intended (which it obviously does, from a certain minority of the population's top-of-the-K-curve POV).
Honestly, this is a good strategic move for USA lifestyle status quo, given Japan does still hold a massive amount of US bonds / debt obligations (even though in the past decade it has been lessening its exposure to US debt instruments).
I believe 2026/2027 is the threshhold where USA interest (on our debt) is the top-line of our fiscal budget. #USA
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This is not financial advice (I am a semi-retired datacenter ELECTRICIAN, as bluecollar as they come):
look at the top marketcaps now verse just a few years ago. Pre-Covid, a $2T$+ marketcap was a rare achievement (i.e. Saudi Aramco... which is sometimes not even Top 10 anymore!): now there are three companies that are solid $4T$+ marketcaps, sometimes flirting into $5T$ (a few days at a time).
Inflation is the only answer, from that same top-of-the-K POV. Gotta keep them assets 'tected, ya'll.
Or track gold. Artwork. Land. Anything Real, legally speaking (except soon/now: perhaps not SFH housing) #WhateverDawg
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If you've been saving up for a house: right now you should really check out Michael Bordenaro's recent video on the topic of "Corporate Landlords shedding rental homes" [1] – I have no affiliation other than enjoying his almost-daily audio commentary – he is a former realtor (I went to college he sold houses) and his topics are extremely observant and varried.
Michael's self-shot walks helped inspire me to get in better shape (e.g. lose "dead parent" weight, lower BP, &c) and rejoin "the tanktop generation" (he is a bit younger than me, but I never grew up so...). |-30lbs|-12kg~|
Save until you can put down at least 20% (to avoid additional insurance fees), because in a-fifth of US states insurance is already going to cost more than property taxes (which is ridiculous)! [recalled from video, below; double-check my aging flesh memorybanks]. One in twelve SFHs are NOT insured, including mine (a rental); I also do not have personal rental insurance, as tenant, because I. do. not. care. #Mom&Pop
Not to repeat myself, but I'll point to earlier comments about what's going on with interest rates [1].
For some context here, it's worth mentioning the Yen carry trade [2]. This is actually relevant because it allegedly underpins the AI investment boom [3] and the Yen appreciating is a real problem for investors who borrowed Yen to invest, particularly if it's into a bubble that may well pop. It's a double shammy.
I'm wondering if this is going to be another George Soros moment. Soros famously broke the Bank of England who were trying to maintain a rate for the pound [4]. If massive AI investment is fueled on the Yen then there's a pretty big icentive to break the Yen by investors. This administration would normally be on board with that sort of thing (and actively profit from it) so it's not yet clear to me what's going on.
OK, let me restate that, since I had to think about it for a bit to see what you were getting at:
The yen carry trade is when you borrow yen (at ~0% interest), convert to dollars, buy assets in dollars, those assets hopefully appreciate, but they don't have to appreciate all that much because you were able to buy them on leverage with no interest.
But the other way to win on that trade is if the yen becomes cheaper while you were holding dollar-based assets. So those who are currently in the carry trade (that is, have borrowed yen) would not mind if the yen suddenly became dramatically cheaper.
I think that's a longer form of what the parent is saying.
US treasury bond yields are already dangerously high for the US and Japan selling treasuries would push yields up even higher, and could trigger more panic selling from others.
I guess this is Bessent's scheme to try and kick that can down the road.