all right guys so I hope everyone's having a very Merry Christmas and let's get this ball rolling let's talk a bit more before all the mushroom clouds uh appear behind us as we get closer and closer to 2025 so let's not take anything for granted and we have a Christmas surprise now I thought I could take a longer break but we need to talk about China and Japan now on Christmas Eve we discussed how the UK is trying to Pivot to Beijing and a few months before death we saw Maloney make her own trip to
China as well now we have positive news in Asia Pacific well depending on your perspective if you're the US this isn't ideal it's going to make the Quest for her Germany de much harder now three things happened and they underscore how Japan is hedging themselves with China now it seems the G7 are really afraid of the incoming Trump Administration now firstly Japan and China are about to meet the foreign minister wangi is later to visit Japan in 2025 and a lot has happened between Japan and China this year now China of course wants to have
a fresh start with the new prime minister ishiba and Japan's Minister sealed the deal during his Christmas trip to Beijing now by itself this incident seems like just another diplomatic visit but you'll see that both sides wants to rebuild relations now Trump has Ved incredible Terrorist on on China he also threatened Europe and he wants to claim Greenland so we are seeing this big rush by us allies to establish a Lifeline with the Chinese now the next is China's agreement to resume Imports of Japanese seafood Beijing has imposed a blanket ban in August 2023 and
that caused the price of Japanese seafood to plunge China accounts for 23% of all Seafood exports and it's roughly $600 million so staring economic trade here is incredibly helpful to relations it's a tangible benefit that China can give and Japan desperately needs but let's make the case more airtight during the visit Japan also announced a plan to relax visa rules for Chinese tourists so maximum stay will be increased from 15 days to 30 days now I guess the money from China The Travelers the tourists is just too attractive as Beijing plans to pump trillions into
their economy Japan wants a taste of that stimulus now we can't underestimate how much the affluent Chinese spend now I can tell you from personal experience is frightening when I walk into the malls in Singapore every single luxury store I see they are briming with Chinese tourists and they are holding big bags in each hand is really out of this world the biggest visitors to Japan are the Koreans but look at China's increase in recent months triple digit jumps in October alone tourist increased by over 120% versus a year ago and going forward we can
expect big increases and for them to take the top spot now consider the crisis happening in Japan the economy is lack Laster and GDP is expected to either stagnate or go negative in 2024 and just last year China accounted for at least 20% of total tourism spending in Japan and this number is going to explode higher and considering Japanese exports are under pressure they need this money Chinese spending has increased by 100,000 Yen a perc they are buying more they're eating more and accommodation is getting more fancy it's a 40% increase in Just 4 years
so imagine the increase in wealth on China Palm scene that stimulus once the property collaps is stabilized we can expect local and international spending to explode higher and who's going to benefit just think about this a bit countries that store and man relations with Beijing it's not a surprise that the G7 members one by one they're all peeling away the us is going isolationist while China is globalizing so Chinese money is about to flow out in the years and decades to come the government is going to unleash 3 trillion Yuan worth of special Bonds in
2025 that's over $400 billion of direct stimulus into the Chinese economy now this money is going to go into pensions is going to go into Insurance subsidies basically putting a flaw on the essentials to free up consumer spending it's really important we underscore this fact China is going to decouple from the US and grow the world at the same time this is the only superpower that can accomplish this without collapsing their economy in contrast we need to look at what Japan faces in 2025 from the incoming Trump economy now we know tariffs are coming but
the biggest slap in the face is hitting for Japan's industry if this us steal I would not allow that deal to happen us steel this was one of the greatest companies in the world you go back 70 years this was the big deal United States Steel and now they're going to let the Japanese buy it I wouldn't let it happen I'd help them so they can make the steel company good again this was the biggest company in the world the strongest company had the biggest reputation it represented our country and now we're selling it to
the Japanese the psychology of that is unacceptable timate the nepon steel deal is in crisis chances are it's going to be scrapped unless Biden Joe Biden approves it Trump is going to toss it into the bin so another industry is in question and that's Japan's Auto industry and we know Honda and Nissan they're considering a merger to counter China and when it comes to Eves from byd they simply can't compete but the situation in the US isn't exactly Rosy either sales are under pressure nisson for example so their Us sales dropped by 2.2% in Q3
this year this is a market that has blocked out Chinese vehicles let's not forget that the situation for Honda also isn't great their Q2 profits have crashed by 15% missing all the forast and the last thing automakers in Japan need are tffs from Trump so let's step back and quantify the exposure Japanese automakers have to the US market is a big reason why Trump's tariffs are so frighted for Japan and just like other G7 countries especially Canada the dependence on us markets is simply staggering in 2023 Japan exported nearly 1.5 billion cars into the US
consumer market and it's over $4 billion of Revenue remember what Trump is threatening a global 10% tariff at the minimum so big Japanese companies are going to face the Heat their level of dependence on one single Market is really something to behold and this gives the US a ton of Leverage in any discussions Toyota sold 23% of the accounts in North America 30% for Nissan and 34% for Honda so when Trump threatens to tariff the world it's a SE issue for all Japanese automakers and this means one of two things they can either build more
factories in the US to escape the taxes or they export less to the country and they suffer a financial heat but where else can they sell too the rest of Asia and the World At Large they are being cornered by Chinese Brands byd cars are swarming the world from Turkey all the way to Thailand so it's a really bad situation to be in if you rely on exports to the US but this also another big issue confronting Japan and just think about it as a consequence of the US raising tax barriers and restoring capacity this
will reduce trade with the world Trump has said it many times now he wants to reduce the US trade deficit with the world and that's his intention and the game plan going forward in 2025 Joe Biden has run up record trade deficits also known as losses higher than any president in history by far these gaping wounds are costing our country countless jobs and trillions and trillions of dollars in wealth one of my top economic priorities will be to stem this bleeding and put American workers on a level playing field it's about time and it's not
just China that's going to get cled Canada Mexico the EU and yes Japan they're all fair game now the US trade deficit in manufactured goods is tremendous in 2022 this reach a staggering $1.3 trillion and with Japan this manufacturing deficit is over1 billion worth in other words the US is exporting a 100 billion paper dollars to Japan so what happens when the US decides to import less now the flow of money the flow of dollars to Japan is going to drop and remember Japan's position in the world economy they are big importer of their manufacturing
inputs oil and food have to constantly flow into the country so Japan's dependence on dollars is still there but if trade with Trump's economy dries up the yen is going to collapse even further since 2021 the Yen has been crashing against the USD it is down by over 30% from the peak Imports coming to Japan especially expensive LG now cost much more than before we have talked about how Brazil is facing a currency crisis but Japan could be on the receiving end in a big way come 2025 the implications AR just restricted to di economy
is going to impact the future of the dollar as well now the Japanese government is sounding the alarm Bells the currency interventions are working at a finance minister he's worried about the Yen once again which is a signal that even more interventions are coming because honestly what other options do they have left now when we see interventions that's just a fancy term for selling US Dollars and buying back your own currency in this case the bank of Japan is thinking of just doing that they afraid of committing to a rate hike in January next year
if the Federal Reserve doesn't cut at Japan hikes we'll likely see the Yen carry trade unwind once again then we'll get a repeat of the August Mayhem when markets around the world collapse Japan's debt crisis will only get worse as well debt to GDP is well over 200% so there is a cealing to the rate hikes now Tokyo has spent close to100 billion do to pop up the Yen every time the currency weakens against the dollar at key levels the boj dumps billions in dollars to defend the Yen it happened at 50 and at 160
again and we probably bre that level by the time Trump takes office the minister has already issued a warning that another dollar selloff is on the cards this trend won't just be constrained to Japan Brazil also Burns $17 billion to rescue the collapsing real a global currency crisis is on the horizon in 2025 especially with Trump's tariff War But realize this isn't good for the US THS will constrict the flow of dollars out into the glob global economy as a result the propensity or inclination to buy us bonds will drop Trump has threatened countries moving
away from using the dollar you can dollarize but we'll punish you so bricks could get hammered by us sanctions but if he himself launches a trade war is going to back fire on the reserve status as well so we are facing a mountain of contradictions in US economic policy and as Japan men's relations with China this is also bad news for the dollar and by extension us bonds now we know China wants to dollarize they pushing for local currency settlements in bilateral trade and is not just with Russia it's with the whole world in 2022
China and Japan's bilateral trade hit an incredible 43 trillion yen and it's over $330 billion now we have no idea how much is settled in bilateral currency but we do know the bank of Japan just extended their curcy swap line with Beijing both countries can now exchange local currencies to the tune of 200 billion R&B or 3.4 trillion yen and that's around $30 billion worth and this amount could always increase down the line so their layers of contingency plans countries are not just sitting around waiting to be clobbered Japan might have over a trillion dollars
in US bonds but that could continue to dwindle down especially to rescue the Yen as China globalizers and the US isolate we could see the dollar getting used Less in global trade it's just common sense and this is just a preview of things to come Trump's trade war with the world could very well backfire badly but let me know what you think is Japan hedging against the US with China and will the bank of Japan dumb even more dollars in 2025 let me know in the comments below stay safe be sure to smash the like
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