For the coming week, I’m going to be writing / providing considerable information on some of the very troubling developments taking place in Japan. As you already know, I watch Japan very closely ( much more so than the U.S) and am “compelled” to share with you some of the things I’ve recently come to understand.
1. Fukushima
With over 300 tonnes of contaminated radio-active water flooding back into the pacific ocean “daily” for the past 2 FULL YEARS – the nuclear disaster in Japan is the absolute #1 largest threat to humanity I will have seen ( and likely yourselves ) in our lifetimes. The current situation is so dire, that Abe and the Japanese government have now passed a “new bill” granting Japan’s govt sweeping powers to declare state secrets where in whistleblowers and journalist may face up to ten years in jail for exposing anything the Japanese government declares “a special secret.”
If you can imagine how frail the situation is – if a single “spent fuel rod assembly ” of the 1000’s hanging precariously in reactor 4 where to break in open air – 30 million citizens of Tokyo may face evacuation, crippling the world’s third largest economic centre, paving the way for complete global economic disaster.
As little coverage as the story is getting in the West, the threat at Fukushima is very, very real and will take many, many years to even “contain” – let alone repair. All the while…the contamination continues with estimates of impacting the entire Pacific Ocean over the next 5 years.
This is an excellent breakdown of the situation moving forward, should any of you care:
http://www.geoengineeringwatch.org/fukushima-facts-that-you-have-not-been-told-about-dire-update/
Given the “passing” of this new bill, I fear it’s unlikely we will really “ever” get the information needed to properly evaluate the situation at Fukushima, as it’s obvious the Japanese don’t want to speak of it. Tourism, exports, health care, government reputation etc…take your pick – the lasting effects on Japan ( and it’s economy ) will be felt for many years to come.
Throughout the week I want to also touch on China’s recent military actions concerning Japan, as well the country’s “mushroom cloud” of debt and rapidly aging population.
The Domino Effect: How Japan’s Crisis Reshapes Global Currency Markets
JPY Weakness and the Safe Haven Paradox
The irony facing forex traders right now is profound. Japan, traditionally viewed as a safe haven currency, is sitting on what amounts to a financial and environmental time bomb. The yen’s role as a funding currency in carry trades has masked the underlying structural weakness, but make no mistake – the fundamentals are deteriorating rapidly. With the Fukushima situation draining billions from government coffers annually, and the new secrecy laws preventing transparent reporting of costs, the JPY is living on borrowed time. Smart money is already positioning for prolonged weakness against major pairs, particularly USD/JPY and EUR/JPY. The Bank of Japan’s money printing operations, ostensibly for economic stimulus, are increasingly being used to fund disaster management and containment efforts that show no signs of ending. This creates a perfect storm for yen debasement that could last decades, not years.
Commodity Currency Implications and Pacific Trade Routes
The contamination of Pacific fishing grounds and agricultural exports from Japan creates massive opportunities in commodity currencies. Australia and New Zealand, as major food exporters to Asia, stand to benefit enormously from Japan’s declining export capacity. The AUD/JPY and NZD/JPY crosses are particularly attractive for long-term positioning. Canadian agricultural exports and seafood will also see increased demand as Japan’s own production becomes increasingly questionable. What’s more telling is that major shipping routes across the Pacific are already being altered to avoid contaminated waters, increasing costs for Japanese importers and making their goods less competitive globally. This shipping disruption alone justifies bearish positioning on JPY across the board. The knock-on effects will ripple through Asian trade relationships, potentially strengthening currencies of countries that can fill Japan’s traditional export roles.
China’s Military Posturing and Regional Currency Instability
China’s recent establishment of an Air Defense Identification Zone over disputed territories isn’t just military posturing – it’s economic warfare with direct currency implications. Beijing understands that a weakened, distracted Japan focused on internal crisis management cannot effectively challenge Chinese regional dominance. This military pressure compounds Japan’s existing problems, forcing additional defense spending at a time when resources are already stretched thin managing Fukushima. The yuan is being positioned as the dominant Asian currency while the yen faces this multi-front assault. Chinese manufacturing is already capturing market share from Japanese competitors, particularly in electronics and automotive sectors where “Made in Japan” is losing its premium status due to contamination concerns. Currency traders should watch for coordinated selling pressure on JPY whenever China escalates territorial disputes, as it forces Japan to divert resources from economic recovery to military preparedness.
Debt Monetization and the Demographics Death Spiral
Japan’s debt-to-GDP ratio was already unsustainable before Fukushima, but the ongoing crisis has accelerated the timeline to crisis. With an aging population requiring increased healthcare spending – particularly for radiation-related illnesses that won’t be officially acknowledged – and a shrinking workforce, Japan faces a demographic collapse coinciding with environmental disaster. The government’s only option is aggressive debt monetization, which means systematic yen devaluation is not just likely but inevitable. This isn’t temporary stimulus – this is permanent currency debasement to manage an unmanageable situation. The implications for carry trades are enormous, as the yen will remain artificially cheap for funding purposes while other central banks begin tightening cycles. Long-term forex positioning should assume the yen will lose significant value against all major currencies over the next decade. The demographic math alone justifies this view, but when combined with ongoing disaster costs and military pressures from China, the yen’s decline becomes not just probable but mathematically certain. Traders focusing on shorter timeframes miss the bigger picture – this is a generational trade setup against the Japanese yen.
Pass on a tuna sandwich once again, let the Chinese invade Japan.
Problem solved
You know….it’s almost starting to look that way yes.
China has certainly been “flexing it’s muscle” in a number of areas as of late.
This new “gag” bill is an attempt to prevent panic and mess up the status quo. They’re quite happy (as is the US) for stocks to carry on rising and their currency value to drop. Anything that jeopardises that is not in their interests and now illegal by the looks of it. Wouldn’t have been surprised if China had behaved like this but for “democratic” Japan to do so I’m shocked. With credibility issues already raising eyebrows this has done nothing to help that.
Yes it’s untimely no question as…..”real coverage” would sure put a “dint” in the current “global enthusiasm for stocks”.
I can honestly say, I’m truly saddened by this – as for the first time in as long as I can remember “I personally” am directly affected by something so huge , with such massive implications that I’m forced to take it into consideration on a larger scale than I’d care to.
Understanding that the process of removing the “1000’s of fuel rod assembly’s” MANUALLY as opposed to the computerized “robotic system” that once did the job has it difficult for me to believe it can be achieved without inccident. The process has to be repeated “1000’s” of times absolutely perfectly. Estimates are it may take up to 40 years! Not to mention the liklihood of earthquake being 95% over the next 3.
Looking at it from all angles, it seems likely that things will get a whole lot worse before even “close” to getting better.
Ya the situation in Japan is incredibly scary. There is already so much damage showing up in the Pacific. As someone that grew up on the Pacific and spent tons of time in her waters it frankly pisses me off. More needs to be done in terms of Japan opening up and admitting the reality of the problem and seeking some international help. But no they are too proud to do so.
I’m super choked about it. Totally bummed as ya…..the cat is “waaay outta the bag” now, and it looks like the “powers that be” will look to sweep this one under the carpet for as long as they can as well.
The Pacific man! I love that Ocean! Any everything in it!
I can’t believe its not a “major international co operative” with every single resource available thrown at it 24 /7, as it warrants it no question. And I ask a couple of friends and family there in Canada – haven’t heard a thing.
No shit Kong I agree. It doesn’t get much bigger and more beautiful than the Pacific. Not to mention it’s impact environmentally. …hard to even comprehend. Ya the ignorance level is insane! My parents own a place in Maui and they don’t know a bloody thing about it! Hardly anybody does. I think David Suzuki is changing that but it’s probably too little to late. Sad sad shit
You and I both. I am a nature fanatic, and am near heart broken considering that “no matter what anyone says” things will never be the same, and are likely gonna get much worse.
I have family that work in the environmental field, and assumed they’d be “well in the know” as this can/will affect future generations / all wildlife and certainly anything “West Coast Canada” environmentally speaking.
Zip.Nada.Nothin.
Sad indeed.
This is good though…what will be read on your blog today will help get the word out a little further and perhaps make a hit with someone that has influence. It all helps. Enjoy your Sunday bro!
Ya I doubt man…but thanks.
Falling on deaf ears – I’m pretty used to that.
Haha no shit hey. The struggle with this issue for me is how to help. I can’t grow a mustache or give money and I don’t know how to clean up nuke waste. So I guess what a guy does is just ‘advertises’ this mess as much as possible and hopes that enough pressure builds. If anybody has anything to say about this I’m very happy to hear it.
My newbie question on the yen, given your posts on this, is the yen heading or down ?
Sorry it might be obvious but I’m not clicking in !
Thanks,
No No……a reasonable question Hf….short term it’s teasing us with a “needed move up” but not being too cooperative.
Mid term I’d like to see a correction higher…
Longer term – We’re likely going to see a complete crisis / slide in the Japanese Yen / Stocks the works – yes.
Hi kong,
Meaning yen will heading down? As i am holding usd/jpy&asd/jpy-short positions.
Interesting article on Bloomberg from 3 days ago regarding Fukushima pollutants reaching US shores in early 2014. It claims they’ll be safe. The comments after the article from people who live there suggest that’s “bollocks!” I know who I’ll believe – the people who are watching debris roll in right now or the media.
Hawaii has already got piles of evidence as I understand it.
Its amazing – I’ll have been warned “a countless number of times” of the potencial “mercury in sushi” as if its a “given” (as fish higher on up the food chain accumulate these elements from many “smaller fish” ) but ask a person in Canada if there’s potencial radio activity coming from Japan’s ( same ocean, same fish , same everything ) no “the world’s” largest nuclear disaster on record and you’re a nut case / conspiracy theorist / fear monger.
Maybe when the next generation’s children are consistantly born with additional apendages – someone will take note.
What people fail to understand is that the “current situation” no…scratch that (as it’s been 2 full years of 300 tons per day of contaminated waste pouring into the ocean)..the currenct situation ISN’T THE REAL PROBLEM.
The mountain of storage tanks ( now being created quickly and inexpensively ) is piling up to the extent that “they can’t store it fast enough” let alone get rid of it……this “coupled” with the impossible task of removing the 1000’s of fuel rods WITHOUT INCCIDENT (a task NEVER ATTEMPTED IN THE HISTORY OF MAN) and looming threat of additional damage / earthquakes has THE FUTURE SCENARIO FAR MORE THREATENING.
If an earthquake takes Reactor 4 out as a whole ( if that building collapses etc…) it will cease to be Japan’s problem as……we’ll all have horns and flippers growing out of our backs.
THERE IS NO CONTAINMENT METHOD / PROCEDURE KNOWN – TO CONTERACT A BREACH OF THIS MAGNITUDE.
All resting on a group of inexperienced workers, a building that has already had the roof torn off, and a large portion of the actual reactor melt directly through the concrete bottom, now in direct contact with the water table.
No problem here people. Yes yes….move along move along.
Don’t worry so much. Soon every living thing on earth will be covered by Obamacare and everything will be taken care of.
Godzilla awakens
If the situation deterioriates, I guess trading will be the least of our worries…