Chapter 156 Japan Can Say No

Leaving aside the unusual fluctuations in the treasury bond market, let’s talk about the Japanese yen futures market. Although there are fewer trading months, Zhongshi still invested 50 million U.S. dollars in the IMM (International Monetary Market) under the CME Exchange. I bought the USD/JPY futures in March. The exchange rate is 110.85 yen to 1 USD, and the total number of lots is 5,000.

IMM's Japanese yen futures leverage is 30 times, and in order to maintain the risk, the broker finally got the price of 4,000 US dollars for each contract in Zhongshi's hands, and the 5,000-lot contract is exactly 20 million US dollars, and the entire target amount reached If the time is too tight and IMM has strict restrictions on holding positions, Zhongshi will definitely go long crazily.

The remaining one billion U.S. dollars in the account passed the joint evaluation of several banks including HSBC, Standard Chartered and JPMorgan, and lent another one billion U.S. dollars. Zhongshi then bought the two billion U.S. dollars at the market price in the market. Yen, the exchange rate price of the transaction is based on the exchange rate of the day 110.01, totaling 220.02 billion yen. After the transaction is completed, the yen capital is deposited into the account of the exchange counterparty Bank of Tokyo as a short-term deposit at an interest rate of 1.5%, and the total time is 18 days.

The conclusion of this transaction was extremely fast, because Zhongshi's credit rating in HSBC and Standard Chartered was very high, which indirectly affected the credit review of Morgan Bank and Bank of Tokyo, and Zhongshi did not intend to withdraw the Japanese yen capital. Come out and deposit it all in the account opened by Skyline Financial Co., Ltd. at the Bank of Tokyo.

At this time, the short-term interest rate in the United States is 3.00%, and the interest rate of the Japanese yen is 1.5% (it has not yet reached February 4, when the chairman of the Federal Reserve raised interest rates). , A major event will happen in the near future, and this event will push the relationship between the United States and Japan and the bond market of the entire world into a dangerous situation.

More than a dozen days passed quickly, and it was February 9th, six days after the Fed raised interest rates. The market’s reaction to the rate hike has completely passed, but the volatility of the bond market is still the same as Greenspan’s. Expected differently.

Through this period of operation, Lewis and his team have successfully established a short position of 40,000 lots in the treasury bond futures market, consuming a total of more than 200 million US dollars of funds, but based on the average daily position of this market More than 300,000 lots, and the average daily trading volume is around 250,000 lots, so this position is not too conspicuous.

  After asking Zhongshi for instructions, Louis and others left 300 million US dollars as a backup, while other funds were allocated to another market for Zhongshi. As for what market, they don't know.

  In February, Japanese Prime Minister Morihiro Hosokawa visited the United States and had a "friendly" meeting with US President Clinton. The two sides held talks again on the trade dispute that had lasted for 8 months.

Although the United States pulled several other countries half-persuaded and half-persuaded Japan, West Germany and other countries to sign the "Plaza Agreement" that promoted their currency appreciation almost ten years ago, the situation of the United States' trade deficit has not changed. growing trend. Although the Japanese economy has been hit hard in the past few years, the amount of trade surplus has been increasing. By 1994, Japan's annual trade surplus reached 120 billion U.S. dollars, half of which, or 60 billion U.S. dollars, came from trade with the United States, of which 60% are caused by exported cars.

In order to reverse this situation, the two administrations of the United States have been exerting pressure on Japan. Clinton’s predecessor, President Bush, even brought a large number of people from the American auto industry to Japan during the Emperor’s funeral, forcing them to buy American complete vehicles and parts.

In the Clinton era, as soon as he took office, he began to negotiate with Japan on trade, especially the automobile industry, and some achievements were made. In July 1993, the United States and Japan reached an agreement to reduce Japan's trade surplus with the United States, which is beneficial to Japan. The "framework agreement" for American products to enter the Japanese market is only an "agreement of intent". The two sides have different explanations for this. For example, on the Japanese side, words similar to "reduce book surplus, increase foreign market access, and greatly increase imports" are understood by the United States as "reducing fiscal deficits, increasing domestic savings, and strengthening international competition. force".

  From the first day of discussion to implementation of this framework, the two sides have been full of distrust. Even in transactions in various fields, both sides have blatantly put down harsh words and threatened to seek revenge.

   What Clinton and his administration are seeking is to let the Japanese auto giants "voluntarily" purchase a certain amount of American-made auto parts every year. In this way, the profits of automobiles exported by Japan will be reduced to such an extent that 40% of the U.S. trade deficit comes from Japan, and 60% of which comes from the automobile industry. That is to say, the U.S. imports automobiles from Japan alone. It stands at 24% of their trade deficit, close to a quarter, so if this part of the deficit can be reduced, the effect on reducing the trade deficit of the entire United States is obvious.

But for Japan, this seems unlikely, because 30% of Japan's trade surplus with the United States comes from automobile exports. If calculated according to the same ratio, the trade surplus created by automobile exports accounts for 60% of Japan's entire trade surplus. This ratio is far heavier than the deficit created by the auto industry with the United States. Therefore, even the Japanese government that changes frequently, no prime minister dares to easily agree to this condition.

  Prime Minister Yoshikawa Hosokawa’s visit to the United States this time has prepared another set of alternative plans, resorting to a set of economic growth stimulus plans totaling up to 140 billion U.S. dollars to please the United States. But as soon as Hosokawa and his team started negotiating with the Americans, they were surprised to find that the Americans knew the bottom line of their negotiations very well, and even quoted the private conversations of the Japanese representatives, which made them confused. (The United States installed bugs on Boeing planes)

The wishful thinking of the Japanese is to stimulate the domestic economic policy plan so that the US dollar capital they currently hold will flow back to the United States. After all, the Japanese yen is not the US dollar, and the 140 billion US dollars will eventually flow to the US market. , a large part of it flows into the U.S. Treasury market, which gives the U.S. government more available capital.

However, the U.S. is not willing, and still insists on requiring the Japanese auto industry to use U.S. parts, and at the same time open markets such as telecommunications, medical equipment, and insurance. The three-day trade talks broke down on February 12.

   This is the first comprehensive breakdown of the US-Japan negotiations after World War II, and it is also the first time that the Japanese government has said "no" to the United States, so it has become a very symbolic event.

   And everything Zhong Shi did was derived from this incident. He knew very well that the US-Japan auto trade negotiations would continue for dozens of months, and the relevant agreement was finally reached in 1995. Because of this trade friction, the relationship between the United States and Japan has dropped to a freezing point.

   Soon, the United States will retaliate against Japan. On February 13, the United States announced the imposition of trade sanctions against Japan. At the same time, it announced that it will use the "Super 301" trade clause in the trade law in March.

  "Super 301" buying clause refers to the amendment to Section 301 in the US trade law, which requires the US government to be solely responsible for investigating a foreign country's trade barriers to US exports. Its core is to transfer the power of trade retaliation from the president to the Office of the Trade Representative, so that negotiators can directly retaliate without asking the president. In addition, the Office of the Trade Representative proposes the trading partners and areas that the United States considers "the most closed market" and "the most unfair" during the six-month period between the end of March and the end of September every year, and then the two sides conduct trade in the following 18 months. Negotiations, once the negotiations fail, the United States can impose unilateral trade sanctions on these trading opponents. The main thing is to impose high tariffs on imported products, up to 100%.

That is to say, when the Office of the U.S. Trade Representative determines that there are trade barriers in the Japanese market on April 1, and if the U.S. and Japan fail to reach an agreement on this within the next 18 months, the U.S. can unilaterally retaliate against Japan. Cars exported from Japan to the United States could be twice as expensive as they are today.

   Having said that, Japan can naturally impose a retaliatory tariff policy on American products, but the problem is that Japan is a country with a trade surplus and the United States is a country with a trade deficit. The two sides are in an unequal position. In other words, if the U.S. raises tariffs, domestic consumers will buy cars made in the U.S., or European cars. Anyway, there is a lot of room for choice, but if Japanese cars lose such a big market as the U.S., the auto industry will Even the domestic economy will suffer a major blow. If Europe follows suit, then Japanese cars will not be able to get along.

   This is also one of the reasons why Europe and the United States have repeatedly imposed high tariffs on Chinese products in later generations.

Naturally, all of this has nothing to do with Zhongshi. The rest depends on how the Japanese continue to negotiate with the US. The reason why he remembers it is because the impact of this incident is very great. It is not only the first time Japan said to the US No, more importantly, it caused a chain reaction in the international bond market.

The breakdown of the trade negotiations has obvious impact on the foreign exchange market. The short-term appreciation of the yen has become an inevitable trend. 106.5 all the way to the highest point of 101.10, once approaching the range of 100 yen to 1 dollar, but in the end there was a slight correction at the close, and finally closed at 102.25 yen to 1 dollar.

Chung-shik’s bet on the Japanese yen was a complete success. The 220.02 billion Japanese yen was then converted into the corresponding U.S. dollar at the market price, earning a harvest of 151.7848 million U.S. dollars. Taking into account the short-term interest rate difference between the U.S. dollar and Japanese yen, he paid an interest of nearly 50,000 U.S. dollars , The final net income reached 151.7 million US dollars.

The 5,000 lots of Japanese yen futures made a profit of 47 million U.S. dollars within half a month, with a gain of 200%. It was also on this day that Zhongshi sold them all. Gold and silver.

  In addition, there are options. On this day, Zhongshi notified HSBC Hong Kong to execute the options. After the options were liquidated, they made a profit of 75 million US dollars. After deducting the option fee, there was still 70 million US dollars left. Adding up several profits, Zhong Shi earned 268.7 million US dollars in the past half a month.

  If there is a profit, there will be a loss. In fact, because the Quantum Fund made a wrong bet on the Japanese yen, they will lose a lot this time!

  (end of this chapter)