Convulsions of sanctions on Russia: Euro and Yen tank against the Dollar
Kanako Mita, Sawako Utsumi, and Lee Jay Walker
Modern Tokyo Times
The Bank of Japan (BOJ) is in a permanent debt-related straightjacket: while the European Central Bank (ECB) is feeling the convulsions of sanctions on the Russian Federation. Hence, the Euro and Yen continue to decline against the Dollar – with few options being available to the BOJ to ease the concerns of major importers.
Ironically, the currency of the Russian Federation is performing well despite G7 and European Union (EU) sanctions. Thus, in a parallel universe, you would think that the EU and Japan were facing sanctions. It underlines the respective weaknesses of G7 and EU nations in the economic arena because they are equally hurting ordinary people with high prices of foodstuffs and energy within their respective nations.
Also, they are damaging countless businesses while political elites ply their geopolitical games: and Africa and other parts of the world are suffering dire consequences because EU and G7 nations can’t fill the energy and other voids in the international market.
Reuters reports, “Euro zone bond yields fell sharply on Monday while long-term inflation expectations dropped below 2% as recession fears deepened after warnings about a possible cut in Russian gas supplies.”
The ECB will buy more bonds from the usual European basket cases that catch the flu rather than a minor cold. For example, the ECB will buy bonds from nations marred by debt, including Italy. Naturally, more conservative fiscal-based nations within the EU – including Austria, Germany, and Holland (the Netherlands) – believe ECB assistance to debt-laden nations should come with essential conditions.
The EURO reached parity with the dollar for the first time in two decades. This happened after further negative EU news concerning gas supplies from the Russian Federation. At the same time, the rising cost of living is hitting people extremely hard throughout the EU. Therefore, political elites in the EU and G7 are enforcing new economic hardship on ordinary people despite over two years of convulsions concerning the Covid-19 crisis.
Concerning Japan, Modern Tokyo Times recently said, “Japan is blighted by the highest ratio of debt in the world. This concerns the endless mismanagement of the economy by the ruling LDP. Not content with this, the government is involved in the unhealthy buying of Japanese Government Bonds (JGBs) via the Bank of Japan (BOJ) – while the BOJ and the Government Pension Investment Fund (GPIF) hold roughly one-eighth of the market capitalization of the Tokyo Stock Exchange (the First Section).”
The BOJ owns roughly 50 percent of all JGBs long-term debt. This equates to just below 529 trillion yen – just below 4 trillion dollars. Hence, with the BOJ facing the interest rate straightjacket – related to the huge amount of debt Japan holds – then expect more BOJ buying of bonds along with further stresses on the Yen concerning the strengthening Dollar.
The Washington Post reports, “In the United States, the Fed has been aggressively raising interest rates, pushing yields on Treasury bonds higher, and making the greenback more attractive to investors than the euro. America’s central bank has raised rates three times in 2022 and has signaled that it has four more increases planned as part of its strategy to bring inflation under control.”
Reuters reports, “Japan’s government is concerned about the yen’s recent sharp falls and will monitor the currency market with even more sense of urgency while working closely with the Bank of Japan, Chief Cabinet Secretary Hirokazu Matsuno said on Thursday.”
However, this basically means more internal debt in Japan by borrowing to support self-induced weaknesses in the domestic economy – once more with ordinary taxpayers bearing the brunt of Japanese political family elites making the usual wrong decisions on a “Washington geopolitical whim.”
The one good thing that Japan is good at is printing money like no tomorrow – and buying bonds in good measure.
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