Reports from the front line of the Trump trade war with the rest of the world indicate that Japan holds a trillion dollars of US treasury bonds. Indeed, the implicit retaliatory threat being that they will offload bonds to the detriment of the US. Trump is, of course, threatening Japan with high tariffs. Something to remember here, Japan used to be a world financial powerhouse. Back in the 1980s, Japan’s housing stock and stock market worth were greater than the US.
“The mid to late-80s were the years of Japan’s “bubble economy”. A time when the country was at its economic peak. A time when everything was made in Japan and Japanese companies would conquer the world. A time when the US put tariffs on Japanese goods and engineered a currency accord that meant a rapid appreciation of the yen. Consider a few historical economic facts about Japan around that time. At the end of 1989, the Nikkei 225 stock market reached 39,000, a historic high it would only see again in 2024. The Japanese property market was worth four times more than the US property market. “
Japan’s Strong Trillion Dollar Hand In The US Bond Market
The US brought down Japan, financially speaking, at this time, and I would imagine that there are plenty of folk in Japan with long memories about this and what it meant for their economy going forward. The irresponsible Trump may just be the motivation for Japan to revenge itself on America via the bond market. Indeed, I think it was their moves earlier that had the Trump regime pull back on their massive global tariffs for 90 days. A trillion dollar of short selling in US treasuries would likely cripple the American and global economies. Things are on a knife’s edge, right now, due to Donald Trump’s ill-advised tariff war with the world. Japan’s revenge on Trump’s America may be coming.
The US Bond Market & Japan’s Strong Hand
Donald Trump, according to many knowledgeable pundits, is mentally stuck in the 1980s and 1990s. Much of his economic schtick comes out of this era of recent American history. It is not uncommon for human beings to forge their strongest thoughts and attitudes at a time when they felt they were in their prime. Trump is nearing 80 years of age and, so, 30 to 40 odd years ago he was in his 40s. Japan was the economic super power back then. The US imposed tariffs on Japan and it worked to supplant US economic might over Japan. Trump, obviously, thinks it will work again and is applying it to China and the rest of the world.
Trump Trade War Will End Dollar Dominance
Most economists think that Trump is crazy and that these tariffs will not achieve the desired outcomes. The US has enjoyed a dollar based economic advantage over every other nation for many decades. The Trump trade war will hasten the demise of this by pushing other countries to trade in non-dollar currencies.
“The dollar has been the world’s principal reserve currency since the end of World War II and is the most widely used currency for international trade.
High global demand for dollars allows the United States to borrow money at a lower cost and use currency as a tool of diplomacy, but that comes with drawbacks.”
Everything is about to become more expensive for every day Americans, thanks to Trump. The bond market is already showing signs of this with the rising 10 year interest rate. This can and will affect home loan rates, and credit rates for loans for cars and everything else. Money will get more expensive.
Japan holds a trillion dollars of US treasury bonds and this is a big financial stick to have in their possession.
“In what moral world does the hegemonic superpower side with the illegal aggressor who invaded another sovereign nation? The Trump regime has joined the axis of evil and what are Americans going to do about it? Are they going to stand up and resist or meekly go along with it? Many of their allies are wondering about this at the moment. As Canada stands up to Trump many Canadians are asking this very question. “
Robert Sudha Hamilton is the author of America Matters: Pre-apocalyptic Posts & Essays in the Shadow of Trump.
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