I've been watching Japanese news to try and figure out why this change of character is occurring with Abe hell-bent on destroying the Yen (sending the market higher), yet the change is still there. I figured perhaps the market discounted the Yen too much on Ave and his BOJ picks, I also thought the Senkaku islands had something to do with it as Japanese products have been absolutely shunned in China because of nationalistic tension over the islands, I just couldn't figure out how it fit in as the situation seemed to be stable, bad, but stable, then comes this news Saturday from The Japan Times.
Keep in mind, the new way to wage "war: so to speak, is through economics, look at Italy, Greece and the ECB, all run by Goldmanites and certainly the strings being pulled by Germany. Germany has the power to FURTHER reduce Greece to rubble through monetary policy and the elections in Italy threaten Italy's well being if the Goldman installed Technocrat is thrown out as it seems he will be.
China is very well aware of this new power play, in fact of all the countries pumping money in to their economies and destroying their currencies in a type of trade war, China is the one that is actually doing the opposite and draining money out of its economy to fight inflation that has been caused by other countrys' central banks engaging in "asset purchases" and the like which have many names. China is forced to do this because the hot money that these countries, the U.S. chief among them, create finds its way in to China and has recently sent Chinese real estate higher again, China doesn't want that bubble, they don't want any bubbles or price inflation as that is the greatest fear, an uprising of their own people caused by economic pain so China is fighting back by draining money from their economy, but this is a passive role they are playing, they can get much more aggressive and with their neighbor Japan and its new political and BOJ leaders (set to be installed) the currency destruction will just continue, China will NOT allow that and it seems they have found the lever they will use to escalate the situation forcing Japan to rethink its policies, while the article doesn't spell it out, read between the lines, after watching Japanese news for the last several days to try to figure out what the change in character was about (perhaps some of Abe's BOJ picks not confirmed, perhaps the balance of the BOJ policy committee still holding a majority against Abe's policies), I think I've found it, the one country that can pull off a major change and problem for Japan, the one country in the region that is likely most effected by hot money flows from Abe's plans and the one country with the most to lose do to Abe's plans has just re-ignited a storm that seemed to be stable for the time, it is in my opinion the lever China will use as they know Japan will not back down despite this first, semi-polite request for Japan to do so. Next will be real steps, moves in the FX and other markets by the one country that can change the course of Abe's plan and absolutely has the incentive to do so.
From The Japan Times- (Knowing the Japanese can't back down)
Beijing urges Senkaku nationalization reversal
BEIJING – China on Saturday demanded that Japan reverse its nationalization of the Senkakus and address the sovereignty dispute through negotiations, urging Tokyo to “make concrete efforts” to prevent fraught bilateral ties from spiralling out of control.
Chinese Foreign Minister Yang Jiechi said the sharp deterioration in Sino-Japanese relations was “single-handedly” caused by Japan’s purchase last September of three of the main Senkaku islets, and accused Tokyo of “illegally” seizing and occupying what he termed Chinese territory. The islet group in the East China Sea is administered by Japan but has been claimed by China since the 1970s.
“The Chinese side believes that Japan needs to face up to reality, take real steps to correct its mistakes and work with us to handle and resolve relevant issues through dialogue and consultations, so as to prevent a further escalation of the situation and stop it getting out of control,” Yang said on the sidelines of the National People’s Congress in Beijing.
Speaking at a news conference, Yang denounced Japan’s Sept. 11 purchase of the Senkaku islets of Uotsuri, Kitakojima and Minamikojima from a Saitama businessman, which effectively nationalized the entire chain, saying the move has “caused great damage to China-Japan relations and undermined stability in the region.”
“We urge Japan to make concrete efforts to improve its relations with China and play a positive and responsible role toward peace, stability and development” in the Asia-Pacific region, he stressed.
Beijing has been pressing Tokyo to acknowledge that the sovereignty of the Senkakus, known as Diaoyu in China, is in dispute, but Japan continues to maintain that the uninhabited islet cluster is an integral part of its territory and denies the existence of the territorial row.
While censuring Japan for its acquisition of the islets, Yang said that developing “long-term, sound and steady (bilateral) relations” serves “the fundamental interests” of both countries and their people. “The Chinese side is ready to continue to develop a strategic relationship of mutual benefit with Japan,” he said. Being they have no other strategic relationships, China is obviously talking about economics/trade.
Yang is expected to be replaced as foreign minister by new Chinese leader Xi Jinping at the end of the National People’s Congress, which runs through March 17. He will likely be appointed state councilor in charge of foreign affairs.
In late January, Xi, who is about to take over as China’s president from Hu Jintao, told a Japanese delegation from the ruling Liberal Democratic Party that he will give serious consideration to holding a summit with Prime Minister Shinzo Abe, adding he wants to promote a beneficial Sino-Japanese relationship based on a broad perspective.
Watch how this story develops and watch how the Yen reacts as China is more than willing to do whatever they see fit to crush hot money flows from the biggest or one of the most effective currency debasers in the world and the closest to China. This isn't about the Islands, it's about Abe's policies and the inflationary effect they have on China.
