Japanese Debt Crisis

Source: DepositPhotos

Chart 1 - Japan has a massive debt problem. +200% of debt to GDP. [Chart via Claude]

Chart 2 - The high debt with inflation has crashed the currency of Japan (Yen). However, Japan has to import all of its oil. A lower yen means the oil is more expensive and hence inflationary. This is not good for the long-term Japanese bond markets. Japan needs a higher currency to reduce energy inflation. 

Chart 3 - BOJ (Bank of Japan) owns over $1.2T ($1200 billion) of US Treasuries. It can sell these Treasuries to buy yen, strengthen its currency to reduce Japanese energy inflation. However, if the BOJ sold these Treasuries, it would send US interest rates higher (and the world). Possibly resulting in a US (and/or world) recession. The US Sec of the Treasury, Scot Bessent, said, 'No, do not sell your treasuries and stepped in to support the Japanese Yen with $60 billion USD.' USA and Japan are now joined at the hip! Gold jumped 10%! There is more YEN support to come over the next 12 months. [Chart via Claude]

Chart 4 - Here is how the USA reduces the debt-to-GDP percent. By keeping nominal GDP greater than US 10 yr interest rates, or negative real interest rates. A bullish environment for hard money.

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