Recently, the yen fell to its lowest level since 1986. The numbers on the screen aren't the key point. The real concern is that the Japanese government, the Ministry of Finance, and the Bank of Japan have exhausted all means to combat this decline, yet the yen's value continues to fall.
① Japan raised interest rates, but the yen continued to fall;
② Japan spent a record amount on defense, but the yen continued to fall;
③ Officials repeatedly warned of the need for decisive action, but the yen continued to fall;
④ Oil prices stabilized somewhat, but the yen continued to fall.
Logically, each of these events, taken individually, should have supported the value of the currency. However, none of these events actually did so. When four different explanations fail in succession, the problem isn't with the explanations themselves, but with the underlying mechanism. The root cause lies in the global dollar funding system. When this system functions properly, trade and credit expand, allowing currencies like the yen to appreciate. When this system faces stress, dollars become relatively scarce, impacting economies closely tied to global trade and dollar-priced imports, regardless of their own central bank decisions.
