Quora Answer: What Effect Did Japan’s Switch from the Silver Standard to the Gold Standard Have on the Yen’s Value against Other Currencies?

The following is my answer to a Quora question: “What effect did Japan’s switch from the silver standard to the gold standard have on the yen’s value against other currencies?”

We need to look at history to understand the parallel.  Japan switched from silver to gold on 1^st October 1897.  The move ended three decades of yen instability against Britain, America, and every other major trading partner already on gold.

Silver fell roughly 20 per cent against gold between 1873 and the end of that decade alone, then kept sliding through the 1880s and into the 1890s as country after country abandoned it: Germany in 1873, most of Europe by the late 1870s, Hungary in 1892, Russia in 1897.  The yen, tied to silver throughout this period, depreciated against the pound, the dollar, and every other gold-standard currency in step with that decline.  A Japanese importer paying for British machinery, or the Japanese government borrowing from London, paid steadily more yen for the same gold-priced good or loan, year after year, for over two decades.

China’s 1895 defeat in the First Sino-Japanese War funded the fix.  The Treaty of Shimonoseki forced China to pay Japan 230 million silver kuping taels, roughly £38 million, or ¥356 million.  Japan used that indemnity to build the gold reserve backing its new standard.  The gold yen was fixed at half the weight of the US gold dollar, worth roughly 50 US cents, nearly identical to the silver yen’s market value of 51 cents at the moment of transition.  The switch cost nothing in relative value at the point of conversion.  It existed to stop future losses.

It worked immediately.  The rate held close to two yen per dollar for the following three decades, until Japan left gold again in 1931.  Exchange-rate risk against Japan’s major trading partners, Britain, the United States, and the rest of gold-standard Europe, effectively disappeared overnight.  Finance officials such as Korekiyo Takahashi pushed the move specifically to remove that risk, expecting lower borrowing costs and stronger foreign investment as a direct result.  Baron Eiichi Shibusawa, the leading industrialist of the era, opposed the switch, arguing exporters had profited for a decade from the weak silver yen.  The reformers won the argument, and the following three decades of currency stability proved them right.

The Regional Story Matters More Than the Global One

China stayed on silver.  It remained the last major economy still using it, all the way through the First World War and into the 1930s.  That single fact split Japan and its largest regional neighbour onto two different currency paths from 1897 onward.  The yen stabilised against gold.  China’s silver-based currency kept depreciating alongside global silver for decades longer.  Japanese exporters and lenders dealing with the gold-standard world gained a stability advantage over Chinese counterparts operating in the same regional trade network, a structural edge Japan converted into cheaper foreign borrowing and stronger foreign investment inflows in the years that followed.

Slower Movement Costs More Now Than It Did in 1897

Japan’s population has been shrinking for over a decade, with births falling to record lows and the workforce contracting every year that follows.  A demographic collapse this severe needs monetary and fiscal policy willing to move as decisively as the 1897 government moved, not a central bank still debating quarter-point increments while a currency crisis forces a joint intervention with Washington.  Japan proved in 1897 it could fix a currency problem in a single legislative session when the political will existed.  It has spent the past three decades proving the opposite: that caution, extended long enough, becomes its own kind of failure, one a shrinking population has considerably less time to recover from than a nineteenth-century economy still building its industrial base.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code

Quora Answer: Should Japan’s Potential Sale of US Treasuries to Fund Its Currency Market Intervention Concern Us?

The following is my answer to a Quora question: “Should we be concerned about the potential sale of US Treasuries by Japan to help fund its intervention in the currency markets?”

Washington intervened alongside Tokyo in August 2026, after the yen fell to 163.73 against the dollar, its weakest level in nearly four decades.  The mechanism gave away the fear.  The New York Federal Reserve sold euros, not dollars, to buy yen.  Japan tapped the Federal Reserve’s own Foreign and International Monetary Authorities Repo Facility, created in March 2020, to borrow dollars against its Treasury holdings as collateral, rather than selling those Treasuries on the open market.  Both governments avoided a straightforward Treasury sale.  That avoidance is the tell.  Washington feared the scenario where Japan, the largest foreign holder of US debt at US$1.14 trillion, dumped bonds to fund its own defence.  This would drive American borrowing costs higher at the worst moment.  Borrowing against the asset instead of selling it is not a technicality.  It is the difference between adding fresh supply to a fragile market and avoiding that market altogether.

The Intervention Failed

The yen rallied briefly to 157.96, then drifted back toward where it started.  The reversal was unsurprising.  Both countries avoided a normal Treasury sale.  This is an admission that the market cannot absorb one.  Treasury Secretary Scott Kenneth Homer Bessent confirmed the diagnosis.  Asked why Washington acted, he told CNBC, “People have bad information.  I have asymmetric information.  So, I think the market should think: why would we have joined the Japanese in the intervention at this time?  Do we know something the market does not know?”  That is trading language, not stewardship language.  A Treasury Secretary describing his own information advantage over the market he is meant to steward is not projecting confidence.  He is describing a position, the way a hedge fund manager describes a trade, and the market read it that way once the rally faded within days.

Dollar Privilege is Cracking

The dollar’s share of global reserves fell from above 70 per cent in 2000 to 56.77 per cent by late 2025.  Central banks have bought over 1,000 tonnes of gold every year since 2022, more than double the pre-2022 pace.  China’s own Treasury holdings dropped to US$633.4 billion in June, the lowest since September 2008, redirected instead into German and Swiss bonds.  Washington’s 2022 decision to freeze roughly US$300 billion of Russia’s reserves is the anecdote every central banker weighing this decision now cites privately.  A reserve asset that can be frozen by political decision is not a pure reserve asset.  It is a loan to a government that can cancel repayment on political grounds, and that lesson did not stay confined to Moscow.  Every non-aligned reserve manager absorbed it at once, and gold purchases accelerated the same year the freeze happened, not years later.

US Debt Made This Worse

National debt sits above US$37 trillion.  Net interest costs hit US$963 billion over ten months of fiscal 2026, roughly US$3.18 billion a day.  A 30-year Treasury auction cleared at 5.216 per cent in August, the highest yield on that maturity since 2001, with demand weaker than dealers expected and the stop-out yield pricing above the level dealers had anticipated.  The Treasury Borrowing Advisory Committee has already flagged a US$1.45 trillion funding shortfall for fiscal 2027 to 2028 at current auction sizes.  A government this leveraged has no spare room to absorb a foreign ally’s bond sale gracefully.  This is why it chose euros over its own currency’s core asset to fund the rescue in the first place.  Every additional dollar borrowed to plug that shortfall competes with the market’s remaining appetite for the exact securities this intervention was meant to protect.

Japan’s own central bank raised rates to 1 per cent in June 2026, the highest level since 1995, on a split 7-1 vote.  It then held at 1 per cent in July, an 8-1 decision, even as it forecast core inflation would climb above its 2 per cent target within the year.  Prime Minister Sanae Takaichi has since appointed a new board member widely read as dovish, tilting the committee back toward caution just as the currency needed the opposite signal.

The caution is not pure timidity.  Japan carries a debt-to-GDP ratio near 230 per cent, the highest of any major economy on earth, and every rate increase raises the government’s own debt servicing cost, a policy trap that limits how fast the BOJ can move without triggering a fiscal problem of its own making.  That earns Japan some sympathy.  It does not change the outcome.  The Bank of Japan has managed the symptom slowly enough to need a joint intervention with Washington, and slow enough that the intervention became necessary rather than optional.

Yes, this should concern us.  Not because Japan sold Treasuries.  Because Japan and America both structured an intervention to avoid that sale, revealing a market too fragile to absorb it, propping up a currency whose central bank still will not move fast enough to fix the cause, constrained by a debt load large enough to make the correct policy politically dangerous to deliver.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code

Quora Answer: Has the Federal Reserve Lost Its Ability to Stabilise the Economy without Constant Deficit Spending?

The following is my answer to a Quora question: “Has the Federal Reserve lost its ability to stabilise the economy without relying on constant deficit spending?”

You have conflated two things.  The question mixes two different jobs.  The Federal Reserve sets monetary policy.  Congress and the Treasury run deficit spending.  The real question is whether the Federal Reserve’s tools still work when fiscal policy has grown too large for monetary policy to offset.  The evidence says no.  The national debt sits near forty trillion dollars.  The Congressional Budget Office reported net interest costs hit US$963 billion over ten months of fiscal 2026.  That is US$3.18 billion a day.  The deficit reached US$1.8 trillion over the same period.  The full year forecast now sits at US$2.1 trillion, US$200 billion above February’s estimate.

A rate cut used to stimulate growth.  Today, it also lowers the government’s own borrowing cost on a debt this size, blurring the line between monetary policy and fiscal rescue.  The Federal Reserve cannot raise rates freely to fight inflation without also raising Washington’s own interest bill past what the budget can absorb.  That is not independence.  That is a central bank negotiating with its own government’s balance sheet before every decision.

Foreign holdings of US Treasuries fell to US$9.299 trillion in June 2026, down from US$9.371 trillion in May.  Japan, the UK, and China trimmed a combined US$61 billion.  China’s holdings dropped to US$633.4 billion, the lowest since September 2008.  Net foreign inflows collapsed from US$56.6 billion in May to US$6.8 billion in June.  An eighty-eight per cent drop in one month.  A thirty-year Treasury auction on 13^th August 2026 cleared at 5.216 per cent, the highest yield on that maturity since 2001.  Demand came in weaker than average.  The stop-out yield priced above what dealers expected.  The market is starting to ask a price the Federal Reserve cannot simply wave away with a policy statement.

The Yen Intervention Failed to Hide the Real Problem

The United States and Japan carried out their first joint yen intervention since 1998, after the yen fell to 163.73 per dollar, its weakest level in nearly four decades.  The New York Federal Reserve sold euros, not dollars, to buy yen.  Japan tapped the Federal Reserve’s own repo facility instead of selling Treasuries outright.  Both governments went out of their way to avoid touching the Treasury market directly.  That both central banks avoided a normal sale of their own reserve currency’s benchmark asset is an admission that the market cannot absorb it cleanly.  An intervention meant to project strength ended up broadcasting the opposite.

Borrowing Short Because Long Has Become Too Expensive

Treasury Secretary Scott Kenneth Homer Bessent leaned on short-term bills for roughly eighty-five per cent of debt issuance in recent years.  Cheaper today.  A rollover risk tomorrow, repeated every few months on a debt this size.  Janet Louise Yellen did this first.  Bessent criticised her for it at the time, then did more of it once he held the job himself.

The Treasury Borrowing Advisory Committee has already flagged a US$1.45 trillion funding shortfall for fiscal 2027 to 2028 at current auction sizes.  A government financing itself on short-term paper is not managing risk.  It is postponing a bill it cannot yet afford to pay in full.

None of these four signals sits in isolation.  Rising interest costs.  Falling foreign demand.  A failed show of strength on the yen.  A funding structure built on the cheapest, shortest-dated paper available.  Each one narrows the Federal Reserve’s room to manoeuvre further.  Monetary policy alone was never meant to carry a fiscal position this large.  It has been asked to anyway, and the strain is now visible in every auction result the market hands back.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code

Quora Answer: What Does China, Japan, Et Al Dumping US Treasury Bonds s Say about the Future of the US Currency & Economic Outlook?

The following is my answer to a Quora question: “China, Japan, et al. have recently been dumping a lot of US Treasury bonds.  What does this say about the future of the US currency and economic outlook?”

Foreign central banks sold US$138.4 billion in Treasuries in March 2026 alone.  Japan led the exit at US$47.7 billion; China followed at US$41 billion, with Luxembourg, Taiwan, Saudi Arabia, India, Canada, and the United Arab Emirates all selling too.  China’s holdings fell to US$652.3 billion, the lowest level since September 2008, an eighteen-year low.  Overall foreign holdings dropped from US$9.49 trillion in February to US$9.25 trillion in March.  Read the headlines, and this looks like the opening chapter of dollar collapse.  When we read the actual mechanism behind the numbers, the story is more mundane, considerably more revealing, and a great deal less flattering to the people currently shouting about it on financial television.

Why They Sold, & It was Not Ideology

This was not strategic de-dollarisation.  It was currency intervention, forced on central banks by the outbreak of the US-Iran conflict.  Crude oil prices surged as the war broke out, and the yen and other Asian currencies tumbled in response.  The Bank of Japan intervened in currency markets in late March and early April 2026, after the yen weakened past the politically sensitive 160 level against the dollar, a threshold Tokyo has treated as a red line since the currency last breached it in 2024.  Surging oil import costs widened Japan’s current account at exactly the wrong moment, and Japan, as one of the most energy-import-dependent economies among the major powers, had no realistic alternative but to sell dollar assets to fund yen support.  Frederic Neumann, chief Asia economist at HSBC, summarised the mechanism without ambiguity: exchange market intervention to support local currencies forced central banks to sell part of their dollar-denominated holdings.  That is defence, not defiance.

A Pattern with Precedent

This is not the first time global central banks have been forced into exactly this position, and the historical parallel is instructive.  During the 1997 Asian Financial Crisis, Thailand’s central bank spent down its foreign reserves defending the baht’s peg to the dollar before finally floating the currency on 2 July 1997, triggering a regional contagion that swept through Indonesia, South Korea, and Malaysia within months.  Central banks across the region learned then, at enormous cost, that defending a currency against a genuine shock requires burning through dollar reserves, not hoarding them for symbolic effect.  The 2013 “Taper Tantrum,” triggered when then Federal Reserve Chair Ben Shalom Bernanke merely signalled the possibility of reducing asset purchases, produced a similar scramble across emerging markets as capital fled and currencies buckled.  March 2026 is simply the latest entry in a well-established pattern: an external shock hits, a currency wobbles, and the central bank sells dollar assets to stabilise it.  Nobody called Thailand’s 1997 reserve drawdown “de-baht-isation.”  Calling March 2026’s intervention “de-dollarisation” applies the same logical error, dressed up for a modern audience.

The Bond Market Felt the Pain Regardless

None of this was painless for holders of Treasuries generally.  Treasuries came under significant pressure as the Middle East conflict stoked inflation fears, forcing investors to demand higher compensation for holding US government debt.  Foreign investors logged a US$142.1 billion valuation loss on long-term Treasury holdings in March alone, on top of the outright selling.  Yields climbing under geopolitical stress is a genuine market event.  It is simply not the same event as strategic abandonment of the dollar as a reserve asset, and conflating the two produces bad analysis and, for anyone trading on the panic, potentially expensive decisions.

The Number That Matters, & Nobody is Reporting It

Here is the detail that undercuts the entire panic narrative, and it rarely makes it past the headline.  Total foreign holdings of Treasuries rose from US$7.7 trillion in December 2021 to approximately US$9.2 trillion in December 2025, an increase of US$1.5 trillion over four years, encompassing multiple periods of supposed “de-dollarisation” panic along the way.  In March 2026 itself, the very month everyone is citing as evidence of flight from the dollar, net foreign private inflows into long-term US securities reached US$162.1 billion, comfortably outweighing the US$14.9 billion in net official-sector selling.  The overall net TIC inflow for the month, combining long-term securities, short-term instruments, and banking flows, came to a positive US$150.7 billion.  Central banks retreated for a month under duress from an oil shock.  Private capital, the money with no political intervention mandate attached to it, kept buying anyway, in considerably larger size.

The Expert Who Actually Checked the Data

Brad Setser, a senior fellow at the Council on Foreign Relations and one of the most rigorous trackers of Chinese reserve behaviour, has directly challenged the popular assumption that China is engaged in deliberate, strategic dollar diversification.  He notes that China has not disclosed the currency composition of its reserves since 2020, which makes confident claims about its intentions inherently speculative.  What evidence does exist suggests China’s currency composition has not shifted dramatically, partly because the dollar’s share of its reserves was already structurally low, around 55%, and further underweighting the dollar means sacrificing yield for no clear strategic gain.  He is similarly sceptical that the 2022 freezing of Russian reserves triggered a wholesale Chinese reserve rebalancing, noting the increased bid for gold from the People’s Bank of China has been, by China’s own disclosed data, marginal rather than transformative.  Setser’s broader point deserves repeating: official Treasury data structurally undercounts China’s actual footprint in US debt markets, because a considerable share of Chinese dollar exposure sits inside custodial accounts, swaps, and funding arrangements that never appear cleanly labelled “China” in the published figures.  The headline number understates China’s real exposure, even as commentators use that same understated figure to declare that China is fleeing the asset class entirely.

Where the Genuine De-Dollarisation Story Sits

The real structural story is slower, considerably less photogenic, and impossible to compress into a single dramatic month.  The dollar’s share of global reserves has fallen from a peak above 70% in 2000 and 2001 to 56.77% by the fourth quarter of 2025, according to IMF Currency Composition of Official Foreign Exchange Reserves data.  Central bank gold purchases have exceeded 1,000 tonnes annually since 2022, more than double the 400 to 500-tonne pre-2022 norm, according to World Gold Council figures. The reason traces back to a single, well-documented event.  In February 2022, the United States, coordinating with the European Union, United Kingdom, Canada, and Japan, froze approximately US$300 billion of Russia’s central bank reserves in response to the invasion of Ukraine.  Every non-aligned central bank on the planet absorbed the identical lesson simultaneously: dollar and euro reserves held inside someone else’s financial system can be rendered inaccessible by a political decision, with no court proceeding and no warning.  That is genuine, durable de-dollarisation, driven by a documented act of financial statecraft rather than a currency intervention triggered by an oil shock.  It has been building quietly for four years.  It has nothing to do with what Japan and China did to their Treasury holdings in March 2026.

The Verdict

Conflating a single, crisis-driven month of central bank selling with a structural loss of dollar privilege is lazy analysis dressed up as geopolitical insight.  The dollar’s genuine vulnerability is not one volatile month of intervention.  It is the decade-long, deliberate diversification into gold and an expanding tail of smaller currencies, driven by the entirely rational fear that Washington will weaponise the dollar system again the next time it decides a foreign government has misbehaved.  China and Japan did not sell Treasuries in March 2026 because they have lost faith in America.  They sold because an oil shock hit their currencies, leaving them no alternative, just as Thailand had none in 1997.  Private capital, watching the same events with none of the political obligation to intervene, bought the dip regardless.  If dollar privilege is ending, it will not end with a headline this dramatic.  It will end the way Setser’s own data suggests it is actually happening: quietly, gradually, and largely off the page that everyone else is reading.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code

Quora Answer: What are the Key Takeaways from the Bank of Japan’s July 2026 Regional Economic Report?

The following is my answer to a Quora question: “What are the key takeaways from the Bank of Japan’s July 2026 Regional Economic Report?”

The Bank of Japan released its Regional Economic Report on 9^th July 2026.  It covers all nine Japanese regions.  It is written in the specific language of central banking, which is to say, it communicates with the precision of someone who has spent considerable effort ensuring that nothing they say commits them to anything in particular.

The Headline: All Nine Regions, No Change

Every single one of Japan’s nine regions maintained its assessment from the April 2026 report.  Not one region was upgraded.  Not one was downgraded.  The arrows — which the BOJ helpfully explains point upper-right for improvement and lower-right for deterioration — all point horizontally to the right.  The BOJ has surveyed the entirety of the Japanese economy and concluded that it looks exactly like it did three months ago.  This is either a testament to remarkable economic stability or a testament to the BOJ's institutional reluctance to say anything that might be interpreted as a commitment.  Given the central bank’s historical behaviour, the latter explanation is more plausible.

The vocabulary deployed across the nine regions is a masterpiece of graduated non-commitment.  Hokkaido is “picking up moderately, although some weakness has been seen in part.”  Tohoku is simply “picking up.”  Tokai is “recovering moderately.”  Chugoku is “on a moderate recovery trend.”  These are nine different ways of saying approximately the same thing — the economy is moving in the right direction at a speed that is insufficient to justify optimism and insufficient to justify pessimism.

The Middle East Intrusion

There is one notable change buried in the report that deserves more attention than its placement suggests.  Kanto-Koshinetsu — the region that includes Greater Tokyo, Japan's economic heartland — has added a clause to its otherwise unchanged assessment: “partly due to the impact of the situation in the Middle East.”  No other region added this qualification.  This is significant because it appears in the Kanto-Koshinetsu assessment and nowhere else.  Kanto-Koshinetsu is Japan’s most economically dense region — home to the capital, the financial sector, the major trading companies, and the most internationally connected businesses.  If the Middle East situation is registering as a material qualifier in the region that drives the largest share of Japanese economic output, the BOJ’s otherwise serene horizontal arrows are understating the directional risk.

The BOJ’s own regional report made the connection explicit in documentation released alongside the summary: “Additional logistics costs incurred by companies detouring around the strait will ultimately be passed on to final goods, generating persistent inflationary pressure.”  The Strait of Hormuz disruption — which has reduced daily oil flow from approximately 20 million barrels to under 2 million — is feeding directly into Japanese corporate costs through longer shipping routes, higher freight rates, and elevated energy prices.  Japan imports approximately 90% of its energy.  A sustained disruption to Middle East supply routes is not a peripheral risk for Japan.  It is a structural cost increase imposed on an economy that has spent three decades attempting to generate inflation and is now discovering that the inflation arriving is not the demand-pull variety it wanted.

The Inflation Picture: Getting What You Wished For

The BOJ has spent approximately three decades attempting to generate inflation through every instrument available to a central bank — zero interest rates, negative interest rates, yield curve control, quantitative easing at a scale that made even the Federal Reserve look restrained.  The target was 2%.  The target was consistently missed downward for the better part of two decades.  Japan is now generating inflation — but not quite the kind it sought.

The BOJ’s report notes that a large number of food and daily necessities companies will raise prices heading into summer, expected to push up consumer prices in the second half of 2026.  This is cost-push inflation rather than demand-pull inflation — prices rising because input costs are rising, not because consumers are so confident in their economic prospects that they are spending freely.  The distinction matters for policy.  A central bank responding to demand-pull inflation raises rates to cool overheated demand — a relatively clean transmission mechanism.  A central bank responding to cost-push inflation faces a much more uncomfortable choice: raise rates to contain inflation while simultaneously depressing the demand that is already insufficient to drive sustainable growth, or hold rates and allow inflation to become embedded in expectations.

The BOJ held its policy rate at 1.0% — a 31-year high — at the July meeting.  Markets are pricing another 25 basis point increase by year-end, bringing the rate to 1.25%.  The majority of analysts surveyed by Reuters expect this outcome.  Whether the BOJ delivers it depends heavily on July and August CPI data — the July figure releases on 21^st August and the August figure on 18 September, providing the primary inputs for the September and October policy meetings, respectively.

The Wage Dynamic

The most structurally important development in the regional report — and the one that will determine whether Japan’s nascent inflation becomes durable or dissipates — is the wage picture.  Many regions reported that firms see the need to offer wage hikes in fiscal 2026 at approximately the same scale as fiscal 2025.  Fiscal 2025 produced the largest wage increases in three decades through the shunto spring wage negotiation process — major companies offered increases averaging approximately 5.1%, the highest since 1991.  The expectation that fiscal 2026 will match this is the critical variable.

Wage growth sustaining at 5% annually is not merely good news for Japanese workers.  It is the mechanism by which Japan’s inflation becomes self-sustaining rather than dependent on external supply shocks.  The BOJ has consistently argued that it will not consider monetary policy normalisation complete until wage growth is embedded enough to sustain 2% inflation domestically.  If the regional reports are correct that wage momentum is being maintained, that condition is gradually being met.

The complexity is in the composition.  Some regions noted that smaller firms are finding it difficult to match the wage increases offered by larger companies — a bifurcation that creates a K-shaped wage environment within Japan.  Workers at large companies are seeing genuine real wage gains.  Workers at smaller firms — which employ approximately 70% of the Japanese workforce — may not be receiving equivalent increases, which constrains the consumer spending that demand-pull inflation requires.

The AI Tailwind

The report’s most consistently positive note across regions is AI-related demand.  Several regions noted that robust global demand for AI-related goods — semiconductors, precision components, and specialised manufacturing outputs — is supporting exports and production despite the tariff headwinds from US trade policy.  This is Japan’s most compelling growth narrative at present.  The country’s precision manufacturing capability, its semiconductor material and equipment production, and its specialised component suppliers sit at the intersection of the global AI infrastructure buildout in a way that is producing genuine export demand that the broader economic picture does not fully capture.  The risk is that this tailwind is concentrated — benefiting specific industries and specific regions more than others — and is therefore insufficient to drive broad-based economic recovery at the pace required to sustain the wage-price dynamic the BOJ needs.

The Rate Path and Its Implications

The BOJ will raise rates again before year-end.  The only question is when.  The July meeting held.  The September meeting is conditional on summer CPI data.  The October meeting is the more probable vehicle if the inflation trajectory warrants it.  A policy rate of 1.25% by year-end remains accommodative by any historical standard — Japan’s natural rate estimates cluster between -1% and +0.5%, suggesting the current rate is already above neutral for the domestic economy.  But the BOJ’s primary concern is not whether the rate is restrictive.  It is whether the rate is consistent with the continued normalisation of an economy that spent thirty years in deflationary stagnation.

Deputy Governor Ryozo Himino’s speech in Wakayama on 2^nd July 2026 — delivered one week before the regional report — outlined the BOJ’s position: Japan’s economy and monetary policy are on a path of gradual normalisation, the pace will be data-dependent, and the risks are balanced between moving too fast and moving too slowly.  Central bank communication does not get more symmetrically non-committal than that.  The horizontal arrows in the regional report are the visual equivalent of Himino’s speech.  Everything is proceeding as before.  The Middle East is a risk.  Wages are encouraging.  AI demand is supportive.  The rate will probably rise.  Probably by 25 basis points.  Probably by year-end.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code

Quora Answer: What if North Korea & China were to Attack Japan?

The following is my answer to a Quora question: “What if North Korea and China were to attack Japan?”

This is not going to happen.  Assuming Japan’s allies, South Korea and the US do not get involved, which is very unlikely, the Self-Defence Force is no pushover.  But we are getting ahead of ourselves.

Wars are exercises in logistics.  Campaigns are conducted based on this.  North Korea is a non-actor.  They have no means to project their military beyond their borders.  They have no functioning air force or navy.  China does not have the air force or the navy to secure the corridor to launch an invasion.  They do not have the sealift to send troops to Taiwan, 200 km away; they have no means to send a meaningful invasion force 3,000 km away.

The PLA is not structured as an offence force.  China’s military invests in area denial, which is meant to deter the USN’s carrier fleets, for example.  It is not meant for offence action over an extended theatre.  As such, they have limited air-to-air refuelling for an air force of that size, and not enough surface vessels.

Quora Answer: If Iran Used Mines to Attack Oil Tankers in International Waters, Would You Support the Use of the US Military to Eliminate the Iranian Threat?

The following is my answer to a Quora question: “If Iran used mines to attack oil tankers headed to Japan, in international waters, would you support the use of the US military to eliminate the Iranian military threat?”

The only source of these allegations of Iranian aggression is the US, and the US is far from the most credible source.  The US has been using the same methods to justify aggression for decades, from the Gulf of Tonkin incident to start the Vietnam War, to the debunked claims of weapons of mass destruction to invade Iraq, to this.  The UK government is America’s lapdog.  Their verification carries no worth either.

The US has been agitating for war with Iran for decades.  This is not new.  It was the CIA which overthrew the democratically elected government of Mohammad Mosaddegh, in a 1953 coup, and installed the Shah as an American puppet.  When the Shah was overthrown, the US used a proxy to invade Iran in the aftermath of the Iranian Revolution.  They sanctioned Saddam Hussein’s invasion which lead to the Iran-Iraq War, and funded him.  American aggression against Iran is not new.

In light of this, who, in their right mind, would sanction further American military adventure and regime change for their selfish interests, and upset the international order?  It was American meddling that created the vacuum that allowed groups such as ISIS to gain traction.  Iran will have Russian and Chinese help.  There is a danger that this will turn into a global conflict, and all because America’s leadership is infested with jingoistic warmongers.

Quora Answer: Why Do Singaporeans Believe That Using English is Essential for Their Economic Survival?

The following is my answer to a Quora question: “Why do Singaporeans believe that using English is essential for their economic survival when several Asian countries, such as Japan, South Korea, Hong Kong, and Taiwan, have achieved economic success without using English?”

The comparisons are not valid.  Singapore is a multicultural nation, and has been so even before independence.  If we did not have English as the language of business and governance, it would not have survived the racial tensions, since language is a sensitive matter.  None of the main racial groups would countenance the promotion of any one language over theirs.  In contrast, all the other nations and territories cited are culturally homogeneous.  They do not have multiple languages contending with each other for supremacy.

Secondly, Singapore is a trading nation, more so than any of the others mentioned, barring Hong Kong.  English is also widely spoken in Hong Kong.  English is the language of international trade.  All major centres of international trade have people who are competent in English, and English is the language of transactions, including correspondence and documentation.  Without English, we would not have that economic success because, unlike Japan and South Korea, we do not have a population base sufficient to generate growth by itself.  We are not a manufacturing hub.  We are not an agricultural nation.  We are net importers, and we generate our wealth in the entrepôt trade.

Quora Answer: Who Will Win a Naval War between the Philippines & Japan?

The following is my answer to a Quora question: “Who will win a naval war between the Philippines and Japan?”

In the 1960s, the Philippines was the naval power of East Asia.  The Philippines military, including its navy, was among the very first nations to deploy troops during the Korean War.  Filipino soldiers, many of them veterans of World War II, fought with distinction.  This was despite them having an insurgency back home.  After the end of the Korean War, the Philippines was instrumental in the setting up of the Republic of Korea’s navy, including training many of its officers, and setting up the maritime interdiction doctrine.  They have a proud history of more than 120 years.

However, mismanagement of the economy and lack of investment in defence has caused them to deteriorate to the extent that the current naval fleet has less than 25,000 personnel, with less than a hundred vessels.  All this to defend an archipelago of almost 8,000 islands, with a population of over 100 million, covering an ocean area of over one million square kilometres, including their EEZ.  In contrast, the Republic of Singapore Navy has just under half that number of modern vessels, with just under 10,000 personnel to cover an area less than 5% of that.

Additionally, most of the Philippines Navy uses obsolete equipment, and is in the modernisation process.  It will take several decades for them to adequately defend their own littoral waters, let alone take on one of the naval powers in the region.  The only other navies powerful enough to contend with the Japanese Maritime Self-Defence Force are the Koreans and the Chinese.  The USN is in a category by itself.  The Philippine Navy is hilariously out of its league.

Quora Answer: Why is Commercial Shipbuilding Unprofitable or Economically Unfeasible in the US?

The following is my answer to a Quora question: “Why is commercial shipbuilding not profitable or economically feasible in the US, even though the leading shipbuilding countries in Europe, South Korea, Japan, and Singapore, are all developed economies with high costs of labour?”

That is not strictly true.  As a former navigating officer, I did some vessel deliveries and maiden voyages, out of South Korea and Japan.  Singapore, for example, does not engage in wide-ranging commercial shipbuilding.  The market is geared towards drydocking, conversions and offshore platforms, which is a niche market.

South Korea and China dominate shipbuilding, with more than 75% of new builds coming from these two countries.  China builds are cheaper, but they are not as well finished as South Korean and Japanese builds.  They are catching up, and getting better.  They have the advantage of lower manpower cost.  South Korea and Japan use a lot of automation, which cuts down on costs.  Japanese builds are very expensive, but you are buying a vessel that almost never breaks down.  South Korean builds are not as reliable as Japanese builds, but they are cheaper.  South Korea can lower cost due to economies of scale, and the sheer amount of builds.  Japan has literal production lines for new builds that are kilometres long.  Europe has over 150 yards, but collectively have less than 10% of market share.  They build for their own markets, many of them smaller vessels for littoral waters, or the near abroad.  They build a lot of ferries, luxury yachts, and cruise ships.  This is their niche.

The US does not have a niche for international shipbuilding.  They cannot build container vessels as cheap as China and South Korea, as technically sound and as quick as Japan.  They do not have a foothold on the niche markets of FPSOs, rigs, ferries and cruise ships.  The US outsourced their production lines for the maritime industry in the same way they outsourced them for much of the manufacturing sector.  It would take massive investment to build up that sort of infrastructure to compete, and this might mean importing thousands of workers from developing countries like Singapore does, something that would be unpalatable in the current economic climate.  It might mean competing in hiring trained workers until that domestic base is built up, which will raise costs and cramp margins.  It might mean going head-to-head with established builders in niche markets, markets which may already be protected and have captive clientele.

There is one area of shipbuilding that the US does lead the world.  It is the foremost builder of warships, the largest aircraft carriers, other surface vessels and submarines.  The problem is that the client is solely the US government is most categories.

Quora Answer: Why are Large Aircraft Carriers Apparently Difficult to Build?

The following is my answer to a Quora question: “Why are large aircraft carriers apparently so difficult to build, even if they are conventionally-powered with oil, when many countries such as South Korea, Singapore, Japan, and China build hundreds of tankers and container ships that are much larger?”

All the countries mentioned above are quite capable of building aircraft carriers.  In fact, all of them have aircraft carriers in everything but name, designated as landing ship carriers, helicopter carriers, or refurbished aircraft carriers, as China has.

What you are likely thinking of would be the supercarriers that the US Navy has.  Again, from a technology perspective, all these countries have the capability of building them, or acquiring that technology.  The question here is do they need it?  Are the costs of maintaining a carrier and the support group worth it?  Does it fit in with their strategic needs?

China is actively working towards having carrier capabilities, and they have expended money and research into acquiring an indigenous ability to not only build carriers, but carrier-based aircraft.  We can argue that they are between 20 to 30 years behind the US in terms of doctrine and deployment, but they are on the way there.  Currently, China has the same technology gap that Russia has – metallurgy.  They do not know the secrets to the exact metal composition of the landing gear and the engine exhaust.  This means that their landing gear snaps too often, and the engine wear is tremendous, limiting the lifespan of the aircraft.  Both of them have also not managed to bring down the weight of the carrier-borne aircraft, limiting deployment numbers and logistics.

Japan already operates very large helicopter carriers that are small aircraft carriers in all but name.  The constraint for Japan is their post-war Constitution, which forbids Japan having an offensive capability.  An aircraft carrier is not a defensive weapon.  It is meant to project force far away from home and extend the theatre of conflict.  Helicopter carriers, apparently, are “defensive”.  This is despite the fact that the Japanese Self-Defence Force can, and has, put VTOL aircraft on their “helicopter carriers”.  They are actively exploring the deployment of F-35 Lightning IIs.

South Korea has helicopter carriers as well.  They have this balancing act of having deterrence against the North, but not appear as a belligerent since their situation is as much a propaganda as a military conflict in armistice.

The issue, as demonstrated above, is not simply their capability to develop it, but whether it suits their doctrine and force structure.  We must also consider that a full-fledged carrier group, including the logistics elements, is very expensive.  It involves an investment in infrastructure, hardware and manpower.  In a worst-case scenario, the US can survive the loss of a carrier group, no matter how catastrophic it is propaganda wise.  Aside from China, none of Japan, South Korea or Singapore could stomache that sort of loss.  The loss of an aircraft carrier is also the loss of an air wing.  It would be a political as well as military disaster.  None of these nations have the strategic manpower reserve to simply field another naval aviation wing.  This is dangerously putting their eggs in one basket.

For Japan and South Korea, naval aviation is an option to confront Chinese assertiveness in the East China Sea, and to support a possible military operation in the Korean Peninsula.  It is a single theatre operation where naval aviation has a supporting role, not force projection far from home.  There is no need for a full-fledged carrier group since they will operate in the near abroad, within the EEZ.

For Singapore, it makes even less sense considering the RSAF has the operational ability to bomb Beijing and come back, her assets are dispersed from Taiwan to Australia, and she has total naval dominance and air superiority in the region.  An aircraft carrier would be operating in littoral waters, and vulnerable to shore launched anti-ship missiles, or swarm tactics by small craft.  These are cheap solutions to destroy an expensive military asset.  It does nothing to help Singapore’s force projection.  Also, the political cost of starting an arms race in ASEAN would not benefit anyone.