Many people find it hard to imagine just how fragile the financial systems of the United States and Japan are.
If the US dollar begins to cut interest rates, how catastrophic could the disaster be?
Just a couple of days ago, the stock markets of the US and Japan plummeted once again, with the same familiar pattern—could it be that the recent stock market disaster in the US and Japan has begun anew?
Is this kind of disaster never-ending?
Well, this time, the biggest difference from the last one is that Japan has changed.
What kind of change has it undergone?
Let's look at the data first to see just how big this disaster is.
On September 3rd, local time, the first trading day of September for the US stock market, all three major indices fell sharply.
The S&P 500 index fell by as much as 2.12% in a single day, while the Nasdaq was even worse, with a drop of 3.26%.
The Dow Jones fell by 626.15 points, a 1.51% drop.
The seven giants faced massive selling, with none escaping, among which Nvidia's single-day drop was as high as 9.53%, and it continued to fall by 2.52% after the market closed, reaching a low of around 105.
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On the same day, the Japanese stock market also faced a significant drop, with the Nikkei 225 Stock Average closing down by 4.24%, and the Tokyo Stock Exchange Stock Price Index falling by 3.65%.
Another plot similar to the last time is that the Japanese yen rose during the same period, although not as sharply as before.
On September 3rd alone, the yen rose by 1.02%, returning to the range of 144.
As expected, the US dollar index also fell slightly, reaching a low of 101.31.
Just like last time, US Treasury bonds once again emerged as big winners.
On that day, US Treasury yields continued to fall, with the 10-year Treasury yield dropping by 6 basis points to 3.84%, which hasn't been this low for a long time.
Having experienced the last financial market disaster, people's psychological endurance has been somewhat strengthened this time.
In summary, there are several aspects in which this time is the same as the last one.
First, the yen carry trade unwinding continues, this time expanding to other currencies such as the euro and the pound, of course, with the US dollar still being the main force.
This indicates that this matter is not over yet, and Goldman Sachs has issued warnings on multiple occasions that yen carry trade behavior causes financial market turmoil.
Second, in the face of large-scale market turmoil, investors generally choose to flee from the high-risk stock market and enter the foreign exchange and Treasury bond markets to take shelter.
Third, the US economic data has turned to the downside across the board, which is alarming, especially with the continuous rise in the risk of the US stock market bubble, and more and more research experts are issuing warnings about the US stock market.
Fourth, the expectation of the US dollar cutting interest rates is getting higher and higher, even though the Federal Reserve's top brass are trying to pull back, but they still cannot stop the market's eager anticipation.
Fifth, the last time US Treasury yields fell sharply, they fell again this time, could it be that US Treasury bonds have made a big profit again?
Some experts even believe that this is a case of manipulation, sacrificing the US dollar and the US stock market, and focusing all efforts on saving US Treasury bonds, because the US Treasury bond crisis is imminent.
The difference this time is mainly that Japan has changed.
The Japanese are full of confidence, and the Ministry of Finance and the Bank of Japan have repeatedly stated that they will consider continuing to raise interest rates.
Japan's interest rate hike has seized the soft underbelly of the United States, and such a good opportunity is indeed rare.
On August 23rd, Japanese Finance Minister Shunichi Suzuki and Bank of Japan Governor Haruhiko Kuroda both sounded hawkish at a hearing in the Japanese Diet, stating that if the economic data meets expectations, they will consider continuing to raise interest rates.
On the same day as the sharp drop in the US and Japanese stock markets, September 3rd, Bank of Japan Governor Haruhiko Kuroda submitted a document to the Japanese government, stating that if the Japanese economy and price performance meet the Bank of Japan's expectations, the Bank of Japan will continue to raise interest rates.
This is an official document, not a verbal statement, which is obviously more formal, equivalent to submitting the official document for the yen interest rate hike.
Why has Japan suddenly become so bold?
Why don't the Americans hold the Japanese back?
In fact, the truth is that the Americans can no longer hold the Japanese back.
Why do we say this?
First, the US election has become a mess, with the two parties fighting fiercely over the US dollar interest rate cut, and the Federal Reserve is facing unprecedented pressure.
The entire United States is busy dealing with its own internal chaos, and no one is responsible for Japan anymore.
To put it in plain language, no one is responsible for Japan anymore.
This has led to strange phenomena such as Goldman Sachs, JPMorgan Chase, and other financial institutions repeatedly warning Japan, while no strong figures from the US government have stepped forward.
Second, Japan has seized the most vulnerable opportunity of the US financial system and has taken the Americans in hand.
The financial systems of the US and Japan are very closely linked, and as long as the Japanese go against the Americans, the United States will be greatly affected.
Third, Japan is determined to continue raising interest rates to achieve the grand goal of reviving the Japanese economy.
As we discussed a couple of days ago, after several years of appeasement policy by Fumio Kishida, the Japanese right-wing forces can no longer tolerate the unbridled bullying and plundering by the Americans.
Especially in the past two years, the Japanese economy has suffered heavy blows, overtaken by Germany last year, and possibly by India next year.
The timing that the Japanese have seized is indeed very good, but if the Americans recover, will they repeat the large-scale cleansing that has been carried out many times in history?
We are looking forward to it, this kind of mutual biting drama is truly refreshing to watch.