At this time, someone is about to ask, is it not a good thing for currency internationalization, trade liberalization, and full opening up? This issue is more complicated. Currency internationalization has pros and cons. There are indeed many benefits, such as increasing the currency’s international circulation, reducing cross-border trade costs and risks, and at the same time it is a manifestation of the power of a major country. The Japanese yen had previously implemented a fixed exchange rate, and the central bank could stabilize the value of the yen at a low level. As we mentioned earlier, Japan’s economy is highly dependent on exports, and the appreciation of the yen will severely impact the competitiveness of Japanese products in overseas markets, which makes the semiconductor industry targeted by the United States even worse.
In 1984, the United States and Japan signed a “Plaza Agreement” with Britain, Germany and France. All countries agreed to sell a large number of U.S. dollars in the international market, causing the U.S. dollar to depreciate. The exchange rate of U.S. dollar to yen before this agreement was 1:240. It became 1:120 in 1987. In just three years, the value of the yen has doubled. There are two arguments. One said that Japan signed it completely voluntarily, and the other said that the United States forced Japan to sign. Anyone with a discerning eye can see that the appreciation of the yen will do more harm than good to exports, but at the time, the Ministry of Finance of Japan, Minister of Finance Takeshita Toshita, actually told the Americans on the day of signing the agreement that it would be no problem for the yen to rise by 10% to 20 Later, in an interview, Takeshita Teng also claimed that Japan signed the agreement voluntarily. Now it seems that either he does not understand economics or he is an “inner ghost.”
In addition, the removal of the restrictions on the exchange of yen means that there will be no resistance to foreign currency entering Japan. It was previously subject to the supervision of the Bank of Japan, but now it is liberalized. The advantage is that Japanese companies are more likely to obtain overseas investment, but the disadvantage is A large amount of foreign currency exchanged into Japanese yen may cause inflation. Coupled with the full opening of the market, the overheating of the real estate stock market is inevitable. As a result, a huge financial bubble has appeared in Japan. Finance is a very magical thing. Obviously it does not create wealth, only responsible for the flow and distribution of wealth, optimizing investment, but it has become a wealth tool for speculators, a weapon for capitalists. It stands to reason that Japan’s financial market was already overheated at that time, and the central bank was required to introduce fiscal austerity policies to prevent economic bubbles from blowing. But in those few years, we caught up with the Fed’s rate cut cycle. In order not to suffer too much, central banks around the world could only cut interest rates. The Bank of Japan did the same. Monetary easing began, and more and more money in the market. Of course, many people are opposed to it, but the Bank of Japan has become more and more weird. Not only did it fail to constrain, it was throwing money everywhere, begging others to borrow it.The uncontrolled financial boom gave birth to the highest land price in human history . At the end of the 1980s, the land price of 620 square kilometers in Tokyo surpassed the whole county of Canada, and the land price of Japan could buy four United States.
Let me tell you a few more stories to see how rich the Japanese were. Due to the pressure from the United States, the yen continued to appreciate unilaterally, which attracted many people to speculate in foreign exchange. Everyone knew that the yen was going to rise. This is totally a steady profit without losing money. The most representative among them is Hanwa Kogyo, a traditional steel company. The president directly leads people to speculate in foreign exchange in his office. By 1989, its income had exceeded twice that of the main business, with a daily income of at least 100 million yen, and 500 million when the market was good. Who is still doing business? No matter what they did in the past, all companies are now investing in financial products, and Japan’s manufacturing industry has begun to hollow out. At the end of the 1980s, money was everywhere in Japan. The Japanese were anxious and even started to eat gold. They really just put the gold leaf into the food. Children were directly given a piece of gold brick as a birthday gift on their birthday. Golf and skiing are popular among the people. Buying works of art, buying buildings, and acquiring American film and television companies internationally are all ridiculous things that the Japanese did when they had too much spare money.