Peter Schiff warns: Japan may dump US debt, sending yields soaring and Dollar crashing

Japan government's decision to approve a multi-billion dollar stimulus package has raised apprehensions among market analysts and economic experts. Noted economist Peter Schiff claimed that the Japanese government may torpedo the U.S. economy. The yen found some support on Friday as Japanese officials stepped up their verbal intervention to stem the currency's decline, while the dollar was on track for its biggest weekly rise in six weeks.

Japan government claimed that it would fund its huge stimulus package without increasing JGB (Japanese Government Bond) issuance. Perhaps the plan is to sell U.S. Treasuries to pay for it. That will send U.S. bond yields higher and the dollar lower, worsening stagflation, Peter Schiff tweeted.

Japan Currency Yen Rises

The yen popped higher after Japanese Finance Minister Satsuki Katayama said intervention was a possibility to deal with excessively volatile and speculative moves, leaving traders on alert for signs of yen buying from Tokyo.

"The warning overnight from the Japanese government was certainly a step up from what we've seen recently," said Lee Hardman, senior currency economist at MUFG.

"That's helping provide more support for the yen in the near term."

The Japanese currency rose 0.4 per cent to 156.82 per dollar, though it remained close to Thursday's 10-month trough of 157.90 and was still on track to lose 1.5 per cent for the week. Much of the focus in currency markets this week has been on the yen, which has plumbed fresh lows as investors worry about the nation's worsening fiscal position brought about by Prime Minister Sanae Takaichi's lavish spending policies.

The yen has fallen around 6 per cent since Takaichi was elected leader of her party on October 4. Takaichi's cabinet approved a 21.3 trillion yen ($135.4 billion) economic stimulus package on Friday.

"The elephant in the room now is mounting intervention risks," said Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho. "Interventions are likely to be opportunistic and short-lived. Essentially, speed bumps, not barricades." Tokyo last spent 5.53 trillion yen, or nearly $37 billion, in July 2024 to intervene in the foreign exchange market to haul the yen away from 38-year lows.

Against the euro, the yen was pinned near its lowest since the introduction of the single currency, although the euro was last down 0.5 per at 180.61 yen.

FAQs

Q1. Which is Japan's currency?

A1. Japan's currency is Yen.

Q2. Who is Prime Minister of Japan?

A2. Japan Prime Minister is Sanae Takaichi.