The current and future situation does not seem to reflect optimism about the future. Can the situation in Japan harm the USA?
Inflation is rising in Japan.
The purchasing power of the yen is decreasing.
The Japanese yen is falling continuously.
Japan is selling dollars to see if it can halt the decline of the yen, but they are not having much success.
What is happening to the Japanese economy?
- Japan lost its lead in semiconductors to Taiwan.
- Then they lost the electronics and home appliance industries to Korea
- Now they have lost the automobile industry to China.
- The worst thing is that they lost the tourism industry when they dumped radioactive water into the oceans.
How might this affect the US economy?
It’s already bad for the US that Japan is being forced to stop buying government bonds. Japan is the largest foreign bondholder in the United States. This means that the US government is increasingly having difficulty financing its spending. If Japan raises its bond interest rates to increase demand for the yen, it would compete with U.S. bonds, and that would worsen the U.S. government’s ability to raise money. The US and Japan are competing to raise money. The US because it has to bear the costs, and Japan because it has to stop the fall of the yen and prevent the economy from going up in flames.
The Fed would sell $60 billion worth of US Treasuries per month, but market demand is dwindling.
China has sold off shares by 30% and is nearing a 40-year low.
USA and Japan. It’s like watching two people compete for a seat on the Titanic evacuation boat. There will only be one winner in this fight. Who do you think will win?
