The United States and Japan with a mutually beneficial strategy
The United States lowered government bond interest rates while Japan benefited from the weakening yen, implemented in a structure of mutually exchanging benefits.
Of course, initially there were some results, but
The US 10-year government bond rate is back at 4.69, and the yen came back strong-like but is gradually rising again.
If yen weakness continues, the decline in CPI weakness will likely slow down, and because Japan's SME procurement costs will increase, it ultimately becomes a vicious cycle leading to overall cost increases.
Structurally, the primary problem is that US market interest rates are not decreasing,
and the yen continues to weaken.
The biggest problem is the high oil price issue due to the Iran war
and the pressure from big tech companies' corporate bond issuances.
And if the weak yen persists, the decline in inflation rate will slow down and the upper limit of tech stocks' PER will be capped, ultimately creating a problem where a significant correction could occur.
Korea seems fortunate in comparison. The Korean won consistently knocks below 1410 and knocks and bounces back, repeating this about 5-6 times. Of course, I think it will eventually fall if it keeps knocking, but if unexpected variables emerge and it turns back to weak yen, it's not big but there is some downward pressure on the Korean won.
Still, with recent new foreign investors coming in, it's fortunate that the won is quite stable.
Like the comment a member left on my recent post, now BOJ is the variable. Whether it will raise rates or join hands with the US again to reduce upward pressure.
Because the policy has already been implemented once, if it does it again, the forces resisting yen weakness can resist more fiercely.
Or if it applies more upward pressure than before and misjudges the force, Japanese funds and insurance investment funds that went overseas, which invested abroad but if it turns to strong yen, losses would occur and all would be sold, creating the problem of the second coming of 2024's yen carry trade liquidation.
I don't know when Bessent Secretary and Japan's joint yen intervention will happen again or if it will end like this, but if Japan carries out another interest rate hike, Kioxia's stock price, which has the largest market cap, could be affected
and as a result, it could create a short-term decline in the overall semiconductor sector which currently has good sentiment, and in more serious cases, it could face another downturn in the second half.
The current US direction is that Secretary Bessent and Kevin Walsh seem to believe that inflation can be lowered through AI productivity. So they are dealing very cynically with current inflation fluctuations, and in the case of Kevin Walsh, unlike previous Powell, because there is a high likelihood he won't make precise comments about why rates were raised, lowered, or held steady and about future rate directions, a single rate hike could cause panic across the entire market.
Like Secretary Bessent and Kevin Walsh's view, I also think AI productivity can reduce downward price pressure, but it hasn't actually shown up as a precise indicator in real data, and it's still early short-term, so it seems accurate insights will emerge by the second half of next year.
Although favorable winds are blowing into Korea's stock market now, you need to stay vigilant and watch very carefully BOJ's interest rate direction and what level Bessent and Japan will implement their yen re-intervention at.
