The Bank of Japan's potential interest rate hike action is expected to have a profound impact on China's economy. The Organisation for Economic Co-operation and Development (OECD) believes that raising interest rates in Japan in 2024 would be a wise move if prices persist. Specifically, Japan's consumer price index is expected to increase by 2 year-on-year in 20246%, and in 2025 it will **20%。
The United States may exert pressure to raise interest rates in Japan, triggering a debt crisis in Japan and thus achieving a strategic economic harvest. Once Japan decides to raise interest rates, we can expect yields on Japanese bonds to rise sharply, and bonds will **substantially**, and possibly** with them.
For China's economy, Japan's interest rate hike could have a cascading effect. First, in order to maintain the balance of capital flows, other countries in Asia may follow suit with interest rate hikes, which will increase the borrowing costs of Chinese companies, thus affecting our competitiveness in the international market. Second, Japan's interest rate hike could lead to capital withdrawals from emerging markets, including China, which will put depreciation pressure on the renminbi, which in turn will affect export performance. Finally, Japan's interest rate hike could impact global financial markets, which in turn could affect China's foreign exchange reserves and international investment allocation.
When we delve into Japan's fiscal situation, we must confront a reality that cannot be ignored: Japan's debt levels have reached alarming heights.
As of 2023, Japan's debt balance is as high as $13 trillion, while its GDP is only 44 trillion US dollars, and the fiscal revenue is an insignificant 90 million US dollars.
The official debt balance reflects the sum of all of a country's outstanding debt, while gross domestic product (GDP) is a core measure of the size of the economy and the vitality of the market. When official debt far exceeds GDP, it is a sign that the country is facing a heavy debt-servicing burden and fiscal stability is at stake. This risk is undoubtedly exacerbated by Japan's insufficient fiscal revenues to support its large debt.
Interest rate hikes are often seen as a means of curbing inflation and stabilizing the value of money. However, for heavily indebted countries, this could lead to higher borrowing costs and increased fiscal pressures. It is expected that in order to alleviate this pressure, Japan will have to take extreme measures - * a large number of state-owned assets.
However, the impact of interest rate hikes on the Japanese economy goes far beyond that. As an export-oriented economy, Japan's growth depends largely on the international competitiveness of its products and services. The interest rate hike could lead to an increase in the value of the yen, which would have a negative impact on Japan's exports, as it would increase the competitiveness of its products in the international market.
In addition, Japan's main export markets, Europe and the United States, are experiencing a slowdown in growth. If emerging markets fall into a financial crisis due to the repatriation of the yen, Japan's export market could shrink further. This is a double whammy for the Japanese economy: on the one hand, increasing internal fiscal pressures; On the other hand, there is a decrease in the demand of the external market.
When we look back at history, it is not difficult to see that Japan experienced a long period of economic stagnation after the bursting of the real estate bubble in the late 80s and early 90s of the 20th century, a period known as the "lost decade".
Today, Japan is once again at a critical crossroads. Over the past two years, the bubble in Japan's real estate market has inflated to a dangerous level. Under the dual pressure of the continued low interest rate environment and an aging population, real estate is not only a living space, but also the core of Japanese household asset allocation. The supply-side impasse, especially the strict land-use regulations, has greatly limited the number of new ones, further pushing up housing prices.
At the same time, Japan's automotive industry is facing its toughest challenge since the 1970s. The strengthening of environmental protection regulations, the restructuring of the global ** chain, and the change of consumer preferences have all had a huge impact on this traditional industry.
Against this backdrop, if the Bank of Japan decides to raise interest rates, it will hit heavily indebted households hard. Interest rate hikes will lead to higher borrowing costs, which will undoubtedly make matters worse for the borrowing-dependent real estate market and the capital-intensive auto industry. More seriously, it will open the door to international investors who are looking to seek opportunities in Japan's economic woes, and who will be relentless in carving out a piece of the Japanese economy.
It seems to me that the United States has exhausted its harvesting skills, and Japan will be an outcast. Now is the perfect time to act. We should strike decisively when our opponents are at their most vulnerable, so that we can achieve a decisive victory in this economic game. Take advantage of his illness to kill him!
Kunpeng Project