Japan off-loads US Treasuries – Part (ii)

This video is a follow on from the previous video dealing with the topic of your Japan dumping US Treasuries where I talked about the World Reserve Currency status and the Petro-Dollar System, Bonds, risks and return. If you haven’t seen that video, I would recommend you doing so before watching this one because it provides some important background information.

Let’s pick up where we left off …

Safe to say, the stability of the world’s Financial system rests on the US and value of the Dollar.

The US Treasuries are also an important component in the Financial system of the world.

So, that said, let’s now return to Japan.

Japan & Yield Curve Control
Japan has been engaged in Yield Curve Control (YCC). They’ve been trying to prevent the yield on their 10 year Bond from going above 25 Basis Points. I’ve done some videos on Japan and YCC before, if you’re interested in finding out more.

So, the Japanese authorities have been trying to control yields. They do this by buying Government Bonds. This artificially raises the demand for Bonds, bidding up the price and, because there is an inverse relationship between prices and yields, yields go down. Tada. That is YCC in a nutshell.

This is essentially market manipulation which I’m 100% against, but anyway …

We must bear in mind that carrying out YCC comes at a cost. The problem is, in order to buy the Government Bonds, they have had to create currency – massive amounts of currency. But doing this debases the currency. And we can see evidence of this. The value of the Yen has declined relative to the Dollar.

This brings us finally to the topic of these videos. The value of the Yen has increased of late, ever since the Japanese authorities started to intervene on 22 September - so almost 2 weeks ago at the time of producing this video.

We now have to consider how they intervened … How have they supported the Yen?