Japan Swiftly Takes Over US as Thousands of Millionaires Exit; US Heading for Bankruptcy

On October 12th, as Wall Street nervously bets on the Federal Reserve's next rate-cutting pace and the U.S. Treasury's plan to further increase the issuance of U.S. Treasury bonds to make up for the funds exhausted after the debt ceiling at the end of 2024, leveraged funds are still heavily shorting the Japanese yen. The yen has plummeted nearly 6% against the U.S. dollar since October 1st.

At the same time, the unwinding of yen carry trade has not yet ended, so this suddenly soaring financial black swan in Japan may continue to contribute to the historic collapse of U.S. Treasury bonds and the upcoming historic debt default in the United States, beginning to turn to continuously harvest the United States at a speed that is faster than the speed of sound.

According to the Deputy Governor of the Bank of Japan, Ryozo Himeno, on October 11th, we are witnessing a record increase in wages in Japan, and the real interest rate is still negative. If the Bank of Japan is "more confident" in the realization of its economic and price forecasts, it will consider raising interest rates.

Immediately following, the former Chief Economist of the Bank of Japan, Eiji Maeda, revealed to the media on October 12th that the new Japanese Prime Minister, Shigeo Ishihara, will not prevent the Bank of Japan from raising interest rates. The most likely time for a rate hike would be in December this year or January next year, as it would have been half a year since the July rate hike, and the Bank of Japan would also release its latest economic forecasts at that time.

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Japanese Prime Minister Shigeo Ishihara has already stated on October 12th that he will not interfere in monetary policy affairs, as the central bank's task is to achieve price stability, reversing his tone a week ago when he "explicitly refused to raise interest rates."

A survey of 32 analysts conducted by CNBC on October 12th unanimously believed that the next rate hike by the Bank of Japan might be in December. The Governor of the Bank of Japan, Kazuo Ueda, cautiously stated after the interest rate meeting on September 20th that if the data allows, the Bank of Japan will be ready to raise the benchmark interest rate at any time to counter the Federal Reserve. If economic and price developments are in line with its forecasts, the central bank is prepared to continue raising interest rates.

Analysis indicates that the improvement of Japan's economic conditions and the fading concerns about a U.S. economic recession, combined with the possibility that the Federal Reserve may pause rate cuts once in November, could lead to a reassessment of the prospect that the Bank of Japan may again raise interest rates at a speed that is faster than the speed of sound in December or January next year to defend the yen and harvest the United States.

Immediately following, a report published by JPMorgan on October 12th pointed out that, at present, the unwinding of yen carry trade has not yet ended, with only 80% of the trades completed. For example, Japan's official public pension funds and insurance companies have already established a U.S. bond asset exposure that accounts for 30% of their total assets, exceeding $5 trillion. Once the Federal Reserve's rate cut in November falls short of expectations, they are ready to unwind yen carry trade at any time.

Since the yen is still one of the most undervalued currencies, there is still room for further unwinding of recent carry trades. The institution stated that yen carry trade is unlikely to quickly return to the levels before the yen rebound, as it is difficult to eliminate the technical damage caused to portfolios by short-term sharp fluctuations.

In the past few weeks, due to concerns about the stability of the U.S. economy, turmoil in the U.S. financial market, and the impact of the Bank of Japan's sudden interest rate hike to harvest the United States after the financial Pearl Harbor, yen volatility has risen sharply, and carry trade has suffered heavy losses.Analysts have stated that Japan's move against the US dollar is not a one-time event, but rather the beginning of a sustained harvest from the United States. The logic behind this is actually quite straightforward. For over a decade, global investors have been borrowing cheap yen in the market environment of Japan's negative interest rate era, creating a yen-US and yen-euro interest rate differential effect. Once Japan begins to raise interest rates, this situation will be reversed, causing tens of trillions of dollars of European and American funds to flow back to Japan. This indicates a shift in Japan's path of using the printing press to consume the world, and under the pressure of "curing the disease by scraping the bone," the Japanese authorities are contributing to the historic sell-off in the US financial market.

Yen arbitrageurs previously invested trillions of dollars in a "deep-water bomb" in the environment of high US dollar interest rates, which is about to start harvesting the United States. This is because the appreciation of the yen forces traders to close their most favored transactions in the past, "long US dollars and short yen," and the arbitrage transactions of $200,000 that the Japanese authorities have been engaged in under the negative interest rate environment in Japan for more than 40 years are a huge "timed deep-water bomb" for the US financial market.

After Japan starts the interest rate hiking cycle, it may have a "flood and beast" tidal harvest effect on the US financial market. This shift will affect the global financial market and the flow of capital, as Wall Street realizes that Japan is finally starting a comprehensive counterattack against the Federal Reserve, considering a comprehensive interest rate hiking cycle.

The Japanese Ministry of Finance stated on October 1 that Japan's total foreign exchange intervention in the third quarter of this year reached 10.1 trillion yen (about $73.2 billion), and the funds for Japan's intervention are usually obtained by selling US debt to exchange for US dollars. Data shows that in April and May of this year, Japan also sold a total of about $6.3 billion to support the yen.

The continuous demand from Japanese official institutional investors for US debt has always been a driving force for US debt to maintain low yields, which will accelerate the liquidation of US debt investors' positions. After continuously selling US debt, some will turn to Japanese debt.

Subsequently, J.P. Morgan analysts further stated that the shift of the Bank of Japan will cause incalculable shocks to the US financial market, which will push the benchmark yield of 10-year US debt to rise by 50 basis points, triggering the US Treasury market. This will become more clear in an environment where investors are still assessing when the Federal Reserve will finally stop cutting interest rates and will keep interest rates at a higher level while fighting against the resurgent inflation.

Subsequently, Greg Mankiw, known as the master of the Federal Reserve market, issued a final warning to Federal Reserve Chairman Powell on October 12, "Considering that Japan has already sent a hawkish signal to the Federal Reserve and no longer continues to take over the issuance of US debt, coupled with the exponential increase in the US debt repayment pressure, the US Treasury market may only have one last impact before collapsing."

The expectation of interest rate hikes by the Bank of Japan has further triggered market concerns about triggering a US debt crisis. Coupled with the US financial market already struggling in the environment of "high debt, high interest rates, and low growth" this toxic combination, at the same time, the expectation that the Federal Reserve will cut interest rates less and slower will eventually backfire on the US economy, posing risks to US corporate profits and causing the burden of US debt interest expenditure to multiply.

This indicates that the current US financial system is already in a state of panic, and the expectation of Japan's sword being used to raid the US financial Pearl Harbor again may be an unwelcome development for US debt, US stocks, and fixed-income markets that have already suffered heavy losses, putting the US financial market on the edge of a precarious cliff, which means that investors may withdraw from the US financial market at a faster speed.The consequence of this is that it puts the U.S. financial market system, which is based on the dollar, at risk. This is because, for the United States, the world's largest economy, there are many issues besides the high valuation of dollar asset prices, such as uncertain economic policies, inflationary pressures, and pension debt.

In this regard, ZeroHedge, a U.S. financial research institution, analyzed in a follow-up report on October 12 that the United States has already seen cities experiencing a massive exodus of wealthy individuals due to debt and inflation crises, truly staging an American version of "Exodus." In recent months, nearly 8,000 millionaires in Chicago, the largest city in Illinois, are fleeing in record numbers. This foreign media outlet stated that this phenomenon of wealthy individuals fleeing is also evident in other high-tax states.

For example, in West Virginia, Louisiana, Hawaii, Mississippi, Alaska, Connecticut, and Wyoming, and Illinois is just the beginning.

The following image data of the risk level ranking of U.S. cities and counties released by JPMorgan also shows that in the annual budgets of more than a dozen cities, more than 50% is used to fund the maintenance costs of past expenditures, which may also be destroyed by this financial debt "nuclear bomb." This may become more clear in the context of Japan's rapid harvest of the U.S. market.

According to the latest data released by the Federal Reserve, the U.S. debt deficit has more than doubled 20 times compared to when Reagan delivered his farewell speech in 1989. With the continuous expansion of the debt scale, it has now exceeded 35 trillion. According to Goldman Sachs' prediction, the budget deficit for fiscal year 2024 alone will break through the 2 trillion mark.

According to the 2021 city financial condition survey report updated and released by Accountingtruth, a U.S. accounting industry institution, on October 2, for the 75 most populous cities in the United States, 61 major cities have accumulated very serious financial and debt problems during the spread of the new coronavirus, and there is not enough money to pay for all the bills, including pensions, because the current debt costs are rising with interest rates. However, the negative economic growth has further suppressed the improvement of fiscal conditions, and the phenomenon of wealthy individuals fleeing reveals that the U.S. economy has begun to collapse, and the U.S. cover-up will be officially unveiled.

According to the latest views of Jim Rogers, a U.S. Wall Street financial tycoon, in a media interview in Singapore, he said: "The United States is the world's largest debtor nation, with printing and debt everywhere, and will eventually pay the price." On October 3, U.S. billionaire Musk also issued a "heading towards bankruptcy" warning for the U.S. debt economy, and the phenomenon of wealthy individuals fleeing reveals the secret of the U.S. economic bankruptcy.

Therefore, from this perspective alone, the current U.S. economic recession and the emergence of a debt crisis have become two "self-fulfilling prophecies," which has made the news of Buffett leading the sale of U.S. bank stocks before the Bank of Japan's harvest of the United States, making cash hit a historical high.