The yen was once known as a safe-haven currency allowing investors to protect themselves when broader markets are shaky or other currencies fall, but those days are numbered. Stable government and consistent (and low) interest rates were some of the determining factors, but that was the outcome. ultra low interest rate policy this will be the “safe haven” for the yen which will collapse while gold retains its protective characteristics and soars upwards.
Both gold and the yen benefited as investors sought to put their cash somewhere safe during times of elevated risk. But Japan's ZIRP policy has lasted so long that the economy cannot handle even modest increases in loan prices without triggering chaos. As seen below, the yen is currently in a free fall against gold because it is hemorrhaging purchasing power:
Gold rises over 6 months against the yen
![](https://schiffgold.com/wp-content/uploads/2024/05/image1.png)
![](https://schiffgold.com/wp-content/uploads/2024/05/image1.png)
Source: tradingview.com
If this is what happens with 0-0.1% interest Imagine what would happen if they reached even a modest 1%, let alone the dramatically higher rates that would be set by the free market if a central bank didn't pull the levers.
And although it was once considered correlated to gold, since Japan began raising interest rates, the divergence between the two so-called “safe havens” has been decisive and dramatic:
#Gold Japanese Yen Price vs Yen/USDollar since 1970 (April 23, 2024) – via https://t.co/NjtSzxxNhA pic.twitter.com/7SkCZ6wqM3
— 🇪🇺 🇲🇨🇨🇭Dan Popescu 🇫🇷🇮🇹🇷🇴 (@PopescuCo) April 24, 2024
Now at a Lowest in 34 years, rumors are circulating that the Bank of Japan could intervene to support the yen. Stuck between a rock and a hard place, they will have to continue to let bond yields rise to attract foreign investment, which will also put upward pressure on European and US bonds. And even as things stand, neither the European Central Bank nor the Fed can pay their interest without borrowing even more money.
Since the start of the year, yields on Japanese 10-year bonds have continued to rise.
Japanese government bonds: 10-year yields in 2024
![](https://schiffgold.com/wp-content/uploads/2024/05/image2.png)
![](https://schiffgold.com/wp-content/uploads/2024/05/image2.png)
Source: tradingview.com
Japan is also the largest holder of U.S. Treasury securities, to the tune of more than $1 trillion, and may be forced to start selling off its holdings to prevent the yen from totally imploding. If Japan abandons its Treasury bonds to save the yen, yields will increase and encourage yen carry trade. This will not save Japan's collapsing currency. And with inflation high that global central banks won't be able to control, there's no stopping gold's continued bullish trend against fiat currency.
Of course, the United States will do everything in its power to prevent Japan from dumping its U.S. Treasuries – including reinvigorating them. a new round of QE. With the Bank of Japan trapped, the only “solutions” it has and the only responses foreign central banks can provide all lead to vicious cycles that will tear the system apart and crush the global economy.
The collapse of the yen is a trap for a link collapse doop loop to finally start seriously. In the United States, since the Fed would rather devalue the dollar further than have to raise interest rates enough to stimulate saving rather than borrowing, inflation has no choice but to rise. increase. The central banks of Japan and the United States are both trapped, partly by themselves and partly by each other.
Rather than let Treasury yields rise too high, the Fed prefers to start printing money, even though it recognizes that inflation is far from under control. As Peter Schiff said in his recent interview with Anthony Crudele:
“…Rather than a winning fight against inflation which would cause a serious financial crisis and force the US government to default on its debts and reduce its spending, the Fed will monetize the debt…to prevent these political choices are necessary.”
The yen is beyond repair, and gold will outperform even if the BoJ manages to narrow the gap in the short term. But the Yen and USD will be left in the dust, as they ultimately trend towards zero in the long term against the yellow metal.
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