🚨🇯🇵 JAPAN INTERVENES ON THE YEN, BUT THE RISK IS SYSTEMIC 🇯🇵🚨
Japan has just confirmed a massive intervention to support the yen. The last time the Bank of Japan sold dollars to defend the currency, global markets experienced a brutal crash.
Today, however, the situation is even more complex.
The problem is twofold.
On one hand, the weak yen.
On the other, a bond market under heavy pressure.
The yield on the Japanese 10-year bond has reached 2.52%, the highest since 1999, while the 5-year has hit 1.88%, a historical record.
Any intervention to strengthen the yen drains liquidity, further aggravating the bond sell-off.
To complicate matters, oil is at $120. Japan imports energy, so a weak yen makes each barrel more expensive, fueling inflation.
This pushes the BOJ towards a rate hike, but higher rates slow down an already fragile economy.
In fact, the central bank has raised its inflation estimates to 2.8% and cut growth to 0.5%.
The dilemma is clear: raise rates and harm the economy, or stay put and let inflation and the yen worsen.
Meanwhile, investors are heavily short on the yen.
If these positions are closed quickly, the impact could be violent across all markets, as already seen in 2024.
This time, however, with war, oil, and global tensions, the risk is much greater.
#BREAKING #Japan #MarketImpact