Some things, when you look at them alone, seem outrageous.

Looking again, it feels magical.

When you look at it together, you realize, oh, it turns out to be a carefully rehearsed duo performance, with a sidekick holding back mischief.

This matter is about the yen interest rate hike.

Imagine a scene where a muscle-wasting, breathless gangster (dollar) is about to find a place to take a break, lower interest rates, and recover.

At that moment, his most loyal little brother (yen) suddenly raised a brick and hit himself on the forehead, shouting, 'I want to become stronger!'

Big Brother not only did not stop it, but instead showed a relieved smile.

Do you think this is normal?

This is not normal.

The younger brother self-harms, and the elder brother cheers, this scene looks bizarre no matter how you see it.

This is definitely not a coincidence, nor is it that the younger brother finally realized he needed to 'work hard'; behind this is a big chess game, a game that has calculated everyone into it.

First, we need to understand what role the yen has played in the past twenty years.

It is not a serious independent currency; it is more like a 'shadow account' or a 'power bank' of the dollar.

Global speculators, from the wolves of Wall Street to the 'Mrs. Watanabe' next door, are playing an ultimate game of borrowing at nearly zero cost in yen, converting it into dollars, and then diving into the U.S. stock and bond markets for fun, enjoying high returns.

This gameplay is academically called 'arbitrage trading'. How big is the scale?

200000000000.

What concept?

Just multiply Japan's GDP by four, and that’s about the number.

This one-way flow of funds means that gamblers all over the world are helping the Federal Reserve print money, continuously providing a bottom for dollar assets.

Now, Big Brother is tired and is going to cut interest rates.

Logically, when the dollar interest rate drops, its attractiveness declines, everyone should sell dollar assets, and the dollar exchange rate should plummet, leading to a domestic inflation explosion in the U.S., forming a 'rate cut - devaluation - inflation' death spiral.

At this time, the 'self-harm' of the younger brother began to take effect.

The Bank of Japan shakily raised the interest rate sign, even if it was just a tiny bit.

This tiny bit is like dropping a drop of water into a calm frying pan.

Those speculators who borrowed 20 trillion yen were instantly panicked.

Because their borrowing costs have gone up, the interest differentials are no longer so appealing.

What to do?

The KTV party is over; those who come out to mix have to pay back eventually.

Thus, a global 'liquidation wave' has begun.

Speculators are frantically selling their U.S. stocks, U.S. bonds, and various dollar assets to get back dollars, then rushing to the market to buy yen to repay the money borrowed initially.

Do you understand?

Just when the Federal Reserve cuts interest rates and the whole world thinks the dollar is going to collapse, a huge, multi-trillion dollar level of dollar buying suddenly emerges in the market.

This force gave the faltering dollar exchange rate a shot of adrenaline, stabilizing it.

Big Brother wants to lie down and rest, so the younger brother takes a punch voluntarily, attracting all the firepower to create a stable 'hospital environment' for Big Brother.

This is not a younger brother rebelling; this is simply a level of tacit understanding of 'first-class meritorious service'.

This is not over yet.

Japan is not only the 'fuel depot' for global arbitrage trading but also the largest overseas creditor of the United States, holding 1.2 trillion dollars in U.S. bonds.

Big Brother wants to cut interest rates, theoretically, U.S. bond prices will rise, but Big Brother's health is too weak, and the scale of debt has already broken through the sky. Everyone is afraid that one day he won't be able to catch his breath and will directly default.

Thus, U.S. bonds also face selling pressure.

Japan raising interest rates has also provided a divine assist.

Raising interest rates has made Japan's own government bonds more attractive.

Thus, domestic insurance companies and pension funds in Japan, which hold a lot of money, no longer desperately invest overseas, but begin to 'orderly' withdraw funds back to the domestic market.

Note that it is 'orderly', not a panic selling of U.S. bonds.

This is very much the essence.

They are like dismantling a bomb, not cutting one line at a time, but slowly untangling each wire.

This gradual return satisfies domestic demand in Japan while providing a huge buffer for the U.S. bond market, avoiding a liquidity crisis caused by panic selling.

Big Brother's credit has been 'invisibly guarded' by the younger brother in an almost performance art-like manner.

So you see, yen increases - dollar decreases, this set of left-right counter-attacking combinations is a 'lifesaver' for the dollar hegemony in the short term.

It stabilizes the exchange rate through reconstructing interest differentials, supports the bond market through capital inflows, and guides arbitrage trading to exit orderly, avoiding a sudden depletion of global dollar liquidity.

Moreover, if the market experiences turmoil due to the yen's interest rate hike, causing asset prices to plummet, then cheap dollars after the interest rate cut can just come in to 'buy the dip', completing a perfect wealth plunder.

Crazy operations, all crazy operations.

However, the other end of this 'lifesaver' may be tied to a 'gray rhino'.

In the short term, it is a rescue, but in the long term, it may be digging up the grave of dollar hegemony.

First, this breaks the Federal Reserve's monetary hegemony of 'the king wants the ministers to die, the ministers have no choice but to die'.

In the past, central banks around the world had to act according to the Federal Reserve's mood.

When the Federal Reserve raises interest rates, if you don't follow, capital will flow out; if the Federal Reserve cuts interest rates and you don't follow, the exchange rate will explode.

But this time, Japan, under the explicit warnings and pressure from the U.S. (especially from someone like Trump who is so unpredictable), has gone for a reverse operation.

This itself is a signal.

It marks Japan's monetary policy, which begins to consider 'self-rescue' more and more, instead of unconditionally serving 'Big Brother'.

Although as long as U.S. military bases are in Japan, Japan can never expect to be truly independent, this 'non-violent non-cooperation' attitude is already shaking the Federal Reserve's absolute dominance over global monetary policy.

If an elder brother's most loyal younger brother starts to have his own thoughts, how can the team still be led?

Second, this fundamentally does not solve the dollar's cancer.

Where is the root of the dollar's illness?

It lies with the United States itself.

On one hand, the federal government's debt is snowballing towards 40 trillion dollars, making fiscal sustainability impossible; on the other hand, there is industrial hollowing out, and aside from finance and high technology, the competitiveness of the real economy is declining.

The global trend of de-dollarization is even more like cutting the grass at the roots.

This small action of raising interest rates in Japan is at most helping Big Brother to delay time gracefully, allowing overseas U.S. bond buyers to run away a little slower.

But the debts that need to be repaid will not decrease by a cent, and the holes that need to be filled will only grow larger.

This is like a late-stage cancer patient; giving him a little painkiller might make him feel better for a while, but it cannot stop the spread of cancer cells.

The dollar's debt problem is basically unsolvable; the only way out is what we just mentioned: find an opportunity and conduct another round of global financial plunder.

Thirdly, and most terrifyingly, Japan itself may play it wrong.

Japan's own debt problem is even more exaggerated than the U.S., with government debt accounting for 263% of GDP, the highest in the world, making it the 'king of debt'.

It is now playing an extreme operation of 'stepping on the gas (loose fiscal policy to stimulate the economy) while stepping on the brakes (tight monetary policy and interest rate hikes)'.

Raising interest rates will increase the government's debt repayment costs. Once the market doubts the Japanese government's ability to repay, it may trigger a selling spree of Japanese government bonds.

Japan is the world's largest creditor and savings exporter. Once a domestic incident occurs, the 'government bond sell-off - carry trade collapse - global liquidity crisis' death chain will be activated.

What it triggers is not some financial shock, but a global financial tsunami.

If one side intentionally releases a 'gray rhino' from the cage to save Big Brother, if it goes out of control, the first to be trampled may be all those standing nearby, including Big Brother himself.

Finally, we need to look at the third person at the table.

The U.S. and Japan are putting on this two-person show, but the corner of their eyes has never left us.

Under the background of the U.S. cutting interest rates and our side being relatively loose, international capital was originally likely to flow more into our undervalued areas.

Now, with Japan raising interest rates, global arbitrage funds are flowing back, creating panic in the manufacturing market, which artificially creates a 'money shortage', directly tightening the faucet that could flow to us.

This is, on a financial level, blocking our 'siphon effect' and creating obstacles for the internationalization of our RMB.

Of course, everything has two sides.

Raising interest rates for the yen will push up its value in the long term, and Japan's export powerhouses, such as automobiles and electronics, will lose their price advantages.

This is a great opportunity for our manufacturing industry, especially in fields like new energy vehicles where we have already achieved a lead, to seize market share.

When God closes one door, he conveniently pries open the window of the neighbor, Old Wang—this is probably the meaning.

So, do you understand this chess game?

Raising interest rates in Japan is a left-hand strategy led by Big Brother, with cooperation from the younger brother in the dollar hegemony system.

In the short term, it is the 'quick-acting rescue pill' for the dollar, using the younger brother's 'self-harm' to buy Big Brother some precious breathing space.

But in the long run, it is both Japan's 'helpless self-rescue' and it accelerates the loosening of the foundation of dollar hegemony, and it is also a 'gray rhino' that could go out of control at any moment.

For us, this means that the external financial environment will become more complex, turbulent, and full of calculations.

But danger and opportunity have always been two sides of the same coin.

See through their layout, prepare our plans, and even in the chaos they create, we can find opportunities to fish in troubled waters.

After all, when the giant wave comes, only the prepared surfers can ride the storm.

And those who are swimming naked on the beach will only be drowned by bigger waves.