WHY IS #JAPAN SO SCARED ABOUT $JPY CROSSING 152 AGAINST THE $USD?

Crossing a specific FX level isn’t usually a “big deal”. What would be the difference for a country between settling payments at 151.95 or 152.05? Intuitively, it’s quite small.

However, there are 2 specific markets where a “round number” can be a very big deal: derivatives and margin lending. Why? Because more often than not, once the margin call level is breached, the broker doesn’t tend to wait too long to start liquidating collateral unless more of it is delivered very quickly.

Let’s try to put all the pieces of the puzzle together:

1 – The potential losses must be pretty large if all market authorities of Japan are going above and beyond any level of ridiculousness to defend 152.

2 – We are dealing with either a large derivative exposure and/or margin lending one.

3 – The position keeps losing money the more the $JPY loses value.

There is one name that ticks all the boxes: #Softbank.

First of all, it’s no secret here, that #Softbank (that isn’t a bank, and hence they can operate with razor-thin equity without regulatory consequence) is leveraged to the hilt to the point they even posted Softbank shares as collateral (like FTX did FYI) to borrow additional cash as I flagged for the first time 5 months ago.

Secondly, Softbank is a very big whale in both the derivatives and the margin lending markets (as a borrower). How big? Well… big enough to pump the entire Nasdaq and getting caught doing that…

In case you wonder, they didn’t stop manipulating the market through their leveraged derivatives bets, far from it, they simply hid it well in a market where now everyone is doing it since there is no risk of consequences.

The last box Softbank ticks are the FX losses. What’s exactly going on here? This is a matter I touched upon extensively for the first time five months ago in this Twitter-X post [Link].

In a nutshell, Softbank borrowed a lot in $USD to leverage its operations and investments without hedging the FX risks while most of Softbank’s revenues are in $JPY. Consequently, the more the $JPY depreciates against the $USD the deeper the hole in their books.

I dived into Softbank numbers so many times and they are an absolute mess to the point I already warned about them being a dangerous Black Swan a while ago.

Judging the events of these days and comparing them to all the previous 2 times in the past years when $JPY approached 152 against $USD, there are too many coincidences that link the actions of #Japan #BOJ #MOF and #FAS to #SoftBank’s very specific situation. There is no mystery about the coziness of Softbank with many governments around the World, starting of course from the Japanese one that created the massive liquidity bubble from where Softbank could build its colossal leveraged bet on any type (often fraudulent) wannabe tech or “tech washed” company that showed up at their doorstep. Considering this, I wouldn’t be surprised at all if sooner or later we discover that Japan wasn’t printing all these $JPY for whatever (nonsense) monetary excuse they came up with so far despite the raging inflation building up, but simply because they have been secretly bailing out Softbank all this time.

All my recent articles on #Japan situation to have all the background of today’s piece.

WHY A HISTORICAL $JPY CURRENCY CRISIS IS AT THE DOORSTEP OF #JAPAN

“Oops!… I did it again!” – #BOJ DANGEROUS SCHIZOPHRENIA

THE #BOJ DILEMMA – SAVE #JAPAN OR THE GLOBAL #STOCKS BUBBLE

$JPY CARRY TRADE – THE BIGGEST FINANCIAL TICKING TIME BOMB OF ALL?

 SOMEONE SOMEWHERE HAS TO PAY A HIGH PRICE FOR THE BANK OF JAPAN’S INCOMPETENCE

 PANIC BEHIND CLOSED DOORS

 GET READY FOR THE LAST BANK OF JAPAN “FREAK SHOW” OF 2023

 JAPAN END GAME – A DEEPLY DEVALUED $JPY AND A WORTHLESS #NIKKEI