Author: Sheng Tang rushong source wechat official account: the chief shopkeeper’s knife has been authorized to reprint
On June 15, the Federal Reserve announced an interest rate increase of 75 basis points. Less than 24 hours later, the Swiss central bank in Europe announced an interest rate increase of 50 basis points and the Bank of England announced an interest rate increase of 25 basis points. Then, in Bahrain in the Middle East, the Central Bank of the United Arab Emirates announced an interest rate increase of 75 basis points, while the Saudi Monetary Authority announced an interest rate increase of 50 basis points…. In short, with the US Federal Reserve’s interest rate hike, most currencies with strong linkage with the US dollar have opened their own interest rate hikes. To follow the US dollar is not an attitude, but a kind of helplessness. It’s like suoha. If you follow him, you can only disarm him. Unless you don’t play in the first place. [don’t tie the dollar too tightly]
But the yen, which is also tightly tied to the US dollar, has made a difference this time. On June 17, the Bank of Japan announced that it would keep its ultra loose monetary policy unchanged and maintain its negative interest rate policy.
What is called negative interest rate? The simplest explanation is that the money you deposit in the bank not only has no interest, but also has to pay interest to the bank. For example, the current interest rate in Japan is -0.1%. If you save 100 yuan, you have to pay 10 cents to the bank. Of course, this is not called interest, but management fee. In a word, it is not worth saving money in the bank, but it is very cost-effective to borrow money.
We all know that a country’s loose monetary policy to moderately devalue its currency is conducive to the export of its own products. As a deep-processing industry country, Japan uses loose money to promote domestic industrial investment, increase the export competitiveness of its products, and boost Japan’s flagging industries. Although it is a necessity, it is also effective. Although the depreciation of the yen will also lead to an increase in the import cost of Japan, a resource importing country, this one in one out profit difference is acceptable compared with the high value-added attribute of Japanese products. Over the past two decades, Japan has been doing this, and it has really benefited Japan a lot.
On the other hand, Japan, which is at the advanced level of industry, has been relying on ultra loose monetary policy to make its products competitive for so many years, indicating that the competitiveness of its products is being weakened day by day. This is like a patient. In case of emergency, he can take root ginseng to boost his resistance, and then his body recovers and works normally. However, if a patient has been eating ginseng for more than 20 years, his body is absolutely wrong. Once the ginseng is removed, it may lead to the deterioration of the disease and death. Although I am not sure whether this is the case in Japan, it is an indisputable fact that it has eaten ginseng for more than 20 years.
Moreover, even if the western countries basically carried out the monetary tightening policy this time, Japan still went its own way and refused to put ginseng in its mouth, which further illustrates the problem. Obviously, if Japan does not follow up with Europe and the United States to tighten monetary policy this time, the probability of being harvested is almost 100%. Why should Japan insist?
First of all, we need to make sure that Japan can’t spit out the ginseng in its mouth, otherwise its economy will have big problems. Second, even though Japan’s monetary easing has reached negative interest rates, Japan’s resident savings rate is still increasing. From 31% in 2019 to 35% in February this year, although there is only a four point increase, we should know that one of the intentions of the Japanese government to adopt negative interest rates is to force out the deposits in the hands of the Japanese. China knows to engage in internal circulation, and Japan needs internal circulation?
Through this epidemic, I deeply feel the necessity of internal circulation. Only when we use all the money in our hands can more people make money. Of course, the main direction of consumption is the direction of basic people’s livelihood and basic industries. Because only in these directions can the internal circulation flow more widely. A hundred yuan, put in a person’s pocket, is just a piece of paper, but this paper limits the money stock of the whole society. [although there is no flow, it is real, and there is a certain amount of money in a country. If it is issued more, it will lead to inflation]. If the 100 yuan flows in the society, the products can flow with the 100 yuan, so that more people can benefit. The same is 100 yuan. If you put it in the cupboard and spend it in your hand, the social effect is completely different.
The Japanese government has long been interested in this part of the savings held by its own citizens. We have always said that the total debt of the Japanese government is very large, but the savings deposits of the Japanese people are also very high. If we can force all this money out for internal circulation, it will undoubtedly boost Japan’s economy. However, there is no way. Although the Japanese have been trying hard to learn from the west, and even do not hesitate to be the son of the United States, it is difficult to change the impact of Chinese culture, such as the high savings rate. Saving money is one of the characteristics of the whole East Asian cultural circle.
The two main reasons for Japan’s ultra loose monetary policy are to make its product prices more competitive and force its people’s savings out of consumption. But today, the United States has begun to raise interest rates, showing a shining sickle. Why is Japan still insisting? With the depreciation of the yen, it is more and more cost-effective for foreign assets to buy yen assets. Of course, what the Japanese want is that other countries buy because their products are cheap, not because their industries are cheap. Buying products and buying industries are not the same concept. If you buy products, Japan can make money. If you buy industries, Japan will be cut off. If international capital takes advantage of the sharp depreciation of the yen to acquire various industries in Japan, the Japanese are certainly unwilling. But what about Japan, which Europe and the United States dare not say no, even if it is unwilling? What’s more, the depreciation of the yen leads to the formation of a fixed exchange rate, which will allow international capital to make a lot of money by buying and selling the yen. When the yen has no profit to make, they can walk away. What does the ultimate death of the yen have to do with them?
All the above are obvious risks. But Japan insists, and that is the problem. Although it may die if you don’t take the ginseng, you can always take the ginseng a little loose. For example, a little tightening of our ultra loose monetary policy and a little resistance can also make international capital a little cautious when harvesting. Now I lie down and don’t say anything, but I still insist on not wearing clothes. Is this a tempting crime? Japan’s current approach is very abnormal.
If Japan opened its arms to the United States to harvest, I don’t believe it, although it already has the conditions to be harvested. However, today’s Japan can not satisfy the appetite of the United States. Moreover, Japan is now the important place for the United States to rely on in East Asia. It is not conducive to the overall Indo Pacific strategy of the United States to let Japan become its own dish of Chinese food and lose Japan’s Geostrategic advantage. Japan should have other purposes in doing so.
For example, taking advantage of the export advantages brought about by its own currency devaluation to drive the low-cost competition in the export prices of the whole East Asia and even Southeast Asia will form devaluation competition in the currency field. On the eve of the outbreak of the Southeast Asian economic crisis in 1997, Japan had done such a thing. Once the devaluation of the yen formed Japan’s export advantage, neighboring countries, especially Southeast Asian countries, had to follow up the devaluation. Japan flapped its wings, and then formed a storm in East Asia. The simple depreciation of the yen will not have a decisive impact on China, but if Japan’s beggar thy neighbor approach leads Southeast Asia and South Korea to follow suit, China will have to deal with it carefully. After the Southeast Asian financial crisis in 1997, China once ensured that the RMB would not depreciate, so that Southeast Asian countries felt the benefits of having a sea god needle around them for the first time. It was also the first major harvest of China’s economic influence on neighboring countries.
Today’s Japan is very likely to repeat its old tricks and use itself as bait to trigger a wave of currency devaluation in the whole East Asia region, so that American capital can harvest in a wider range, and Japan, which deliberately does so, will certainly get a bit of bone in this harvest.
When I was a child, I once read an idiom story, which is called “fighting for the tiger”. It is said that after a person is eaten by a tiger, the ghost is controlled by the tiger, and a living person must be tempted to be eaten by the tiger, so that his ghost can be free. This idiom is used to describe Japan today. Japan, as a country controlled by the United States, will naturally become an Asian power of the United States. It will not stop until the economic achievements of Asia are lured into the mouth of the United States. However, even if it helps the United States to do more of these things, the ghost attached to the United States will still remain.
As for Japan, we can never speculate about it with even a little goodwill, but with the greatest malice. This is an extremely evil country. In East Asia, it has never thought of becoming a member of it. Instead, it is thinking about how to occupy the territory of other countries and plunder their resources. Since it has the ability to cross the sea, it has coveted its neighboring countries and never stopped invading them.
Therefore, when we see the automatic depreciation of the yen and Japan lying flat voluntarily today, we must not think that it will be dangerous. Instead, we should be vigilant about why this thing should do so. Is there a huge trap under it?