- China Threatens Currency War Retaliation, Warns Japan Against Using China As “Garbage Bin” In Race To Debase!
by Tyler Durden, www.zerohedge.com
About a year ago we warned that in a world devoid of bond vigilantes, long emasculated by the Fed’s relentless attempt to bring inflation back or go bust trying, the only forces left willing to stand up to Bernanke are the Brent Vigilantes TM, who succeed in crushing every recent reflation attempt whenever Brent reaches $130 or above (and US gas at the pump rises above $3.80) yet which are rather leery and susceptible to the CME’s surprise margin-hike counterattacks, and of course China, the same China which every other lemming said last summer would scramble to join the global reflation except for us, as we made it very clear that all hopes of an RRR or interest rate cut are unfounded. Because all the inflation that China (did not) need would be exported to it courtesy of Bernanke and Company’s deliberate and now open-ended printing. For a long time China kept its mouth shut, however, when Japan also joined in this pathological central bank pumping, China may have just had enough. As the WSJ reports,”The president of China’s giant sovereign-wealth fund warned Japan against using its neighbors as a “garbage bin” by deliberately devaluing the yen, joining growing international griping about a potential currency war.“
Perhaps more important than what is said, is what was unsaid, which is that as the animosity between China and Japan accelerates, this time shifting from purely territorial and political demands, Japan will continue to have no access to the China import market which accounts for over 20% of all Japanese exports. This also means that while the country imports commodity inflation and as the bulk of the Japanese citizens suffer under the weight of a collapsing economy, where the soaring Nikkei only benefits 1%, the conflict with China will get worse by the month: “In unusually strong language, Gao Xiqing, president of China Investment Corp., echoed alarms from Latin America to Europe that the new Japanese government is aiming to boost its exports at other countries’ expense via a weaker currency—allegations often leveled at China itself by the U.S. and others.”