US Fails to Save AI Bubble with Yen Intervention
Dr. Andy Xie, an independent economist based in Shanghai, has warned that the US cannot save the AI bubble by propping up the Japanese yen.
The recent intervention by the US to buy yen for the first time in decades had a significant psychological impact on the market, but experts predict that the yen-to-dollar rate will snap back above 160 within three or four weeks.
The yen has been fundamentally weakened due to a double shock: Japan's car exports have been hit by the rise of Chinese electric vehicles and the energy price spike following the Iran war has affected the wider economy.
Japan's reliance on oil imports from the Middle East, which accounts for 90-95% of its needs, is also contributing to its economic woes. The country's car industry, its last remaining economic stronghold, is struggling to pivot towards electric vehicles in the face of growing Chinese competition.
The Japanese government and businesses are not doing enough to address these issues, and Tokyo is running down its reserves to keep the economy afloat. With oil infrastructure in the Middle East at risk of being destroyed due to the ongoing conflict, Japan's economy faces a huge downside in the coming months.