what's happening in japan and why is it affecting our bags?
TLDR what happens in japan doesn't stay in japan.
so what's going on?
japan just approved a massive $135 billion stimulus package (financed by issuing gov't bonds - JGBs) to help its people deal with rising prices and strengthen its economy (cash handouts, energy subsidies etc).
but at over 240% of GDP already, japan's debt threatens to trigger a global fiscal crisis. and markets are bracing for impact.
but why is japan so important?
well, japan is the world's 4th largest economy. and too much debt is deadly (remember the good ol' days of 2008?). japan's debt is already twice the size of its economy and investors are rightly worried about japan's worsening fiscal condition.
japan must soon choose whether to stabilises the yen (its local currency) by allowing yields to rise (triggering a fiscal crisis and risking its huge debt becoming unmanageable), or to keep rates artificially low (devaluing the yen lower and lower).
so why is all this affecting US tech stocks / crypto?
when japan gov't bond (JGB) volatility rises, global funding costs rise. and since companies are valued by discounting future cash flows by funding costs, the higher the funding costs, the lower a company's present value (and therefore the lower its stock price today). and since tech and crypto are correlated, both have dipped bigly.
time will tell what happens to the world's 4th largest economy, but in the meantime markets are watching like hawks, uncertain about what comes next.
fasten your seat belts and expect more volatility as the situation develops.
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