May 3-10, 2024 — CarrZee: Should this selling include Japan’s considerable holdings of US Treasuries (USTs) … this makes US market troubles very sustainable indeed…sustainably bad that is…though it’s probably safe until alternative currencies gather strength….after the presidential election.
I’ve heard some discussion about what are the conditions placed on Japan’s holdings of USTs. When can they sell? In what volume?
These are important questions because sovereign balance sheets are needed to stoke global climate action from $1.7 trillion a year in 2023 to $4 trillion by 2030 (IEA) or even more ($9 trillion says Financial Times).
Perhaps the recent yen weakness indicates big sales of the currency over the past week or two. See this from Google Gemini (I didn’t verify):
The Bank of Japan (BOJ) can technically sell its holdings of US Treasuries at any time. There are no specific restrictions preventing them from doing so. However, there are several factors the BOJ would likely consider before making such a sale:
- Market Conditions: Selling a large amount of US Treasuries could cause a sudden price drop, potentially leading to losses for the BOJ. They would likely choose a time when market conditions are favorable for selling.
- Impact on Interest Rates: The BOJ uses various tools to influence Japanese interest rates. Selling US Treasuries could raise interest rates in Japan, potentially conflicting with their monetary policy goals.
- Impact on the Exchange Rate: Selling US dollars (by selling Treasuries) could weaken the Japanese Yen. This could have both positive and negative consequences for the Japanese economy.
In essence, the BOJ would likely only sell US Treasuries if the benefits outweighed the potential risks. This could happen in a scenario where:
- The BOJ wants to tighten monetary policy and raise interest rates.
- There is a significant change in Japan’s economic outlook that necessitates selling these assets.
It’s important to note that the BOJ rarely sells its holdings of US Treasuries. Their primary goal is to hold these assets as part of their foreign reserves, not to actively trade them.
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Japan is now onto the US ponzi (see below), is my guess (+smarter people than me also think it)…but is it too late for Japan to avoid financial pain from markets as they adjust to a multi-polar world …away from US-dollar dominance?
Tell me what you think at mathew@carrzee.net.
Who’s taking USTs when they can get an alternative asset in a currency backed by gold?
The US conjures money from nothing then lends it to other countries in a bid to exert control over them (see Xeet below…where a key Biden guy dodges the question about why the US is issuing so much debt …”er …because we can…um … er…” …he’s not the first to waver on this question).
My prediction…people outside the US will curb buying of US Treasuries and their borrowing from the US government — because they are sick of being bullied.
Sanctions imposed by the US and its bully-boy mates show so-called “friends” might not be …what they appear to be.
US lending is a way that America uses its dollar dominance to control the world.
Japan, the biggest holder of outside USTs, has probably had enough.
NOTES
From this March 5 Bloomberg yarn:
“As Yamamoto sees it, normalization would mean bringing the (Bank of Japan) balance sheet back to a level where it’s just a little more than required reserves.
“The bank would have to shed ¥440 trillion ($2.9 trillion) of bonds from its portfolio to reach that point.”
BOJ Needs 9 Years to Normalize Balance Sheet, Ex-Official Says
