日本央行無法打贏的戰爭

Original Source: Wall Street CN

From April 28 to May 27, the Japanese Ministry of Finance spent 11.7 trillion yen buying yen. This was the largest single-month intervention in Japan's foreign exchange intervention history.

On June 30, the yen fell to 162.62 against the dollar – its lowest level since December 1986. It touched this level again on July 8 during trading. Today, it continues to trade above 162.

11.7 trillion yen lasted less than six weeks.

It's not that the Bank of Japan (BOJ) didn't try. In June, the policy rate was raised to 1%, the highest in 31 years. Cumulatively, rate hikes since ending negative interest rates in March 2024 amount to over 100 basis points. Adding the 9.8 trillion yen intervention in 2024, the Ministry of Finance has spent over 21 trillion yen of its dollar reserves in the past two years.

Goldman Sachs is not convinced. On July 6, strategist Karen Reichgott Fishman revised her one-year USD/JPY target from 155 straight to 165 – one of the most bearish predictions on Wall Street. Market pricing shows traders estimate a 72% probability of hitting 165 before June 2027.

This is not a "hike by another 25 basis points" issue. The BOJ faces a war it was destined to lose from the start.

The 275 Basis Point Gravity

The forex market doesn't trade absolute values; it trades the differential.

The Fed's benchmark rate is 3.50-3.75%, the BOJ's is 1%. The gap is 275 basis points. Latest CFTC data shows hedge fund net short yen positions are at extreme levels seen in recent years.

275 basis points mean a trade repeated countless times daily: borrow yen – with inflation over 3%, a 1% rate means a negative real rate – swap for dollars, buy US Treasuries yielding over 4.5%. Excluding exchange rate changes, the annualized carry trade return exceeds 3%. Every yen depreciation adds a bit more to the return.

This isn't just "market sentiment." It's a mechanism. The carry trade doesn't care if the BOJ hikes by 25 or 50 basis points. It only cares about the interest rate differential between the US and Japan. As long as the Fed doesn't cut rates – and oil prices are surging, Iran tensions are escalating, the shadow of US inflation is far from gone – the yen faces not the BOJ, but the gravitational field of the entire dollar system.

The 11.7 trillion yen intervention was absorbed by the market in less than six weeks, not because the amount was too small, but because the direction was wrong.

For Every 4 Yen Collected, 1 Yen Pays Interest

More lethal than the US-Japan yield spread is Japan's fiscal situation – a chain binding the BOJ's legs, tightening with every struggle.

The total budget for fiscal year 2026 is 122.3 trillion yen, a record high. Of this, "national debt service" – expenditures for repaying principal and interest on government bonds – is 31.3 trillion yen, a full 3 trillion yen increase from last year's 28.2 trillion, consuming a quarter of the budget.

For every 4 yen the Japanese government collects in taxes, 1 yen goes to its creditors.

More troubling is that this figure is accelerating.

The 10-year Japanese government bond (JGB) yield has risen from 0.25% in 2022 to 2.88% today. The Japanese government isn't repaying old debt; it's issuing new debt to repay old debt – government debt exceeds 250% of GDP, and maturing debt each year must be refinanced with new bond issuance, whose interest rate is over a dozen times higher than the old debt. Within the 31.3 trillion yen debt service, interest costs are growing much faster than principal repayment. Interest rolls onto interest; the snowball grows on its own.

If the 10-year JGB yield rises another 100 basis points – not an aggressive move, just a continuation of BOJ rate hikes or even just tapering its bond purchases – the debt service cost will easily surpass 35 trillion yen, heading towards 40 trillion. At that point, for every 3 yen collected in taxes, 1 yen goes to pay interest.

This is the ceiling for BOJ rate hikes. It's not that inflation doesn't allow it, it's not politics. It's the Ministry of Finance doing the math: hike another 50 basis points, and the yen might not appreciate by 100 points, but the interest bill will increase by trillions first. The market understands this arithmetic too – so raising rates doesn't boost the yen; instead, it reinforces the market's conviction that the BOJ will ultimately be handcuffed by the Ministry of Finance.

Brake and Accelerator

Prime Minister Ishiba's administration has a fiscal stance diametrically opposed to the BOJ's.

In the FY2026 budget, defense spending breaks through 9 trillion yen, increasing for the 14th consecutive year, reaching 2% of GDP in FY2025. The ruling coalition is discussing suspending the consumption tax on food; if implemented, it would reduce annual revenues by 4 to 5 trillion yen. Various economic stimulus packages and household subsidies continue to expand. Nomura Securities warned early this year that this "Ishiba trade" model – Japanese stocks up, yen down, long-end JGBs under pressure – mirrors the market logic triggered by UK PM Liz Truss's "mini-budget" in 2022: the government spends without limits, and the market prices the consequences.

There's only one difference. Truss was gone in 45 days. Japan's fiscal expansion has lasted thirty years.

Rate hikes tighten monetary policy; issuing bonds loosens it. The central bank steps on the brake, the finance ministry floors the accelerator. More ironically, the BOJ itself is the largest holder of JGBs. While its monthly multi-trillion yen bond purchase program is being tapered, as long as it continues buying, every 1 yen of JGBs purchased is 1 yen released into the market. One hand contracts liquidity by raising rates; the other expands it by buying bonds. The two actions cancel each other out.

The market doesn't need to be an economist to understand: every card the BOJ holds is countered by another.

5,346

Behind the numbers lie real costs.

On July 8, Tokyo Shoko Research reported that in the first half of 2026, 5,346 companies with liabilities of 10 million yen or more went bankrupt, a 7.1% increase year-on-year, the fifth consecutive year of increase, and the first time in 12 years that first-half bankruptcies exceeded 5,000.

Companies directly bankrupted by the yen's depreciation numbered 45, a 32.3% increase year-on-year, the highest since records began. The wholesale sector bore half of these – 23 out of 45, compared to just 14 last year. Additionally, bankruptcies due to labor shortages rose 37.7%, and those due to price increases rose 27.6%.

These numbers illustrate a fact obscured by "record high profits at large corporations": the yen's depreciation is not universally beneficial.

Labor shortage is the other side of the same coin. Large corporations attract young workers with high wages. It's not that SMEs lack orders; they lack people to do the work. Concurrent data from Teikoku Databank shows "bankruptcies due to labor shortages" hit a record high.

No Winning Hand

Three paths, each with its own cost.

Don't hike. The yen continues to fall, import costs rise further, SMEs continue to collapse. Social discontent accumulates.

Hike. Government bond interest costs explode, fiscal sustainability is threatened, the market bets the central bank will eventually be reined in by the government – the yen continues to fall, because the market sees an "exit illusion," not tightening resolve.

Hike and shrink the balance sheet. JGB yields spike, global carry trades unwind, Japanese investors sell overseas assets and repatriate funds – the yen might appreciate in the short term, but the August 2024 playbook is on the table: That time, the BOJ's surprise rate hike didn't trigger a steady yen recovery; it triggered a global stock market crash.

None of the three paths work, because the problem is simply not solvable by monetary policy alone. Japan's 250% government debt, its continuously shrinking working-age population, its year-after-year expanding fiscal deficits – these aren't things a 25 basis point rate change can fix.

On July 6, the day Goldman Sachs adjusted its target to 165, the market wasn't waiting for the BOJ's next meeting. It was pricing in something deeper: does the BOJ have any chance of winning?

The answer is becoming increasingly clear: it never did from the start.

162.62 is not the end, 165 is likely not the end either. Unless fiscal discipline miraculously returns, or the Fed cuts rates substantially, this "impossible trinity" will only lock itself tighter. And the direction of the yen doesn't depend on Tokyo; it depends on Washington, Riyadh, and the deeper currents of global capital flows.

All the BOJ can choose, in this unwinnable war, is whether to lose slowly or lose badly.