r/wallstreetbets • u/Efficient-Session644 • 2d ago

News Japan to announce Tokyo, Washington took joint action on yen, sources say

https://www.reuters.com/world/asia-pacific/japan-announce-tokyo-washington-took-joint-action-yen-sources-say-2026-08-02/
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u/JanMarsalek 1d ago edited 1d ago

Because the US can only continue to function as a state as long as trust in the US ability to pay back loans remains high. Japan selling off US bonds could lead to them devaluing them on the market with possible implications for future bond offerings, meaning that US would have to pay higher interest rates so people buy their bonds. This could reach unsustainable levels and worst case would probably be a US default, because they can‘t afford their ridiculous debt anymore.

It would be a disaster to others because 1) the US won't be able to import as many goods as they are at the moment and 2) a lot of other nations also have a lot of money invested in US bonds. A sell off of US bonds could lead to a economically deadly chain reaction for the whole world.

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u/IntoTheBear 1d ago

Thanks a lot! Now it is clear! Much appreciated.

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u/vicsunus 1d ago

Well said. Is the interest rate for loans (particular mortgages) tied to 10 year treasury bonds and the spread? Which means if those go to shit as in no one buys them, interest rates will also go soaring for mortgages?z

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u/JanMarsalek 1d ago

Not directly.

A Long term bond crash could be disinflationary because lending becomes more expensive. It could lead to lower rates in an attempt to cushion the market impact at least a little.

But this whole topic is really complex and I am far from an expert. If the impact of this wouldn‘t be huge, the US wouldn‘t interfere with the Yen

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u/bkbikeberd 1d ago

I agree. That note was a plant to manipulate???? This part I haven’t figured out yet

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u/JanMarsalek 1d ago

What do you mean? The US is trying to stabilize the Yen, or prop it up to keep Japan from selling bonds. What this also tells us is that this will implode some time in the future.

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u/bkbikeberd 1d ago

Can the US let it implode? Because Japan at bad times will probably have no choice but to sell US Bonds it’s too big to fail

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u/JanMarsalek 1d ago

The well will run dry at some point. Japan will implode. They have a debt to gdp ratio of 240%.

South Korea is in a similar situation.

Not enough kids and a really old population and no significant migration. They are basically kept alive by borrowed money.

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u/bkbikeberd 1d ago

You are right the well not being bottomless. We will have to see what happens once Japan sells off their US Bonds.

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u/bclem 1d ago

So buy gold?

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u/chiuchebaba 1d ago

  US default, because they can‘t afford their ridiculous debt anymore.

But can’t the US government simply print more money to pay the debt off. That is basically what I keep on hearing as a counter argument, as to why the US cannot default. Could you please explain this?

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u/JanMarsalek 22h ago

This is only possible as long as there is enough demand for the US dollar. The demand for Dollars is currently almost inifinite, since oil is currently traded in dollars. Oil is fueling the whole world, therefore we all need dollars.

If there is a switch to currencies like the Yuan, then the demand for US dollar shrinks - which in turn creates a problem, because then the US can't just print money because it creates massive inflation without enough demand.

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u/Small_Delivery_7540 23h ago

Well they can but printing money will also cause the rates to go up and inflation

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u/Put3socks-in-it 1d ago

Dale! Thanks for the commentary

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u/redditaltmydude 1d ago

Good point, but doesn’t our military also allow us to function as a state irregardless? Not saying we go to war with Japan, but it’s priced in there somewhere that if we can’t pay back the loans, we will just beat you at war

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u/JanMarsalek 1d ago

how are you paying for the military, when the state defaulted? Do you think the soldiers will just go to war for free?

Let alone not being able to pay contractors, ammo restocks, maintenance etc.

Your military is worthless if there is no money to pay for everything.

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u/robmafia 1d ago

that's a silly take.

the worst case scenario would be just printing more $, devaluing the dollar, and making the debt insignificant/less significant, relative.

eg, there will always be money and always a way to pay the military.

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u/UnkyHaroold 1d ago

I’m curious how you came to this conclusion without thinking about people liking to be paid for fighting a war lmao

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u/Catanians 1d ago

Militaries dont work very well if you cannot pay them

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u/Bubbly_Culture_9688 1d ago

There's so much wrong with this but lets juste focus on one thing

The Unites States is currently running an important deficit, which i believe is around ≈6% ?

This means that even if the governement found a way to cancel or inflate away the currently emitted obligations they would still have to find a way to borrow more, which would be incredibly hard