Whenever the yen strengthened as a global safe-haven currency after 2010, Japan’s stock market was subjected to massive foreign short selling, plunging in days and taking years to recover. With foreign investors controlling 70% of the market, profits were extracted through futures short selling and spot buying. Japan’s once-vast household assets of 1,500 trillion yen have allegedly shrunk to nearly 1,000 trillion yen over 25 years. This essay exposes how political and bureaucratic negligence, combined with chronic contempt for equities, allowed Japan to become a permanent financial hedge for global capital, while poverty spread to one out of every seven citizens.

On the Yen Becoming a Currency of Risk Aversion and Repeated Yen Appreciation
July 17, 2010

As I have written in The Turntable of Civilization, whenever the yen becomes a safe-haven currency and appreciates at every sign of trouble, massive short selling is launched against Japanese stocks at the same time, and share prices collapse to an almost unbelievable degree. The Japanese stock market is an outrageous one: it takes only two days to fall, yet a full year to return to its original level.

During this process, it is self-evident how enormous the profits reaped by foreign investors—who now account for 70 percent of the Tokyo Stock Exchange—must be. Behind the fact that a snot-nosed young man in his twenties earns an annual income of 50 million yen lies the reality that more than ten million young people over the past twenty years, even at the age of thirty, have had no steady employment and earn less than two million yen a year.

As a result of continuous short selling, Japan’s stock prices still have not returned to the levels of a quarter century ago—an almost unbelievable fact. This is the outcome of the foolishness of both government and private sectors in Japan, which have long despised the stock market.

During this time, a British fund manager who was investing European capital in Japanese stocks stated, “Japanese stocks guarantee absolute return.” The method is simple: short selling futures while buying spot stocks. Buffett himself has said that his investment in Japanese stocks consists solely of short selling Nikkei futures. Because Japanese stocks are constantly subjected to short selling, there is no way for them to rise.

Japan’s personal financial assets, once the largest in the world at 1,500 trillion yen, are said by some now to have diminished to around 1,000 trillion yen. If that is true, then over the past 25 years, Japan’s enormous national wealth has been skimmed off in precisely this manner—profiting from currency fluctuations one day, then earning even more through short selling the next. The gains have been astronomical.

That is why they say there is no need to show any restraint.

From the American point of view, since Japan—whom they helped elevate into a superpower—never attempted to stand on its own as an independent economic hegemon and lead the world, the wealth created there should simply be brought back home. By earning massive, guaranteed profits in Japan—one of the most politically and economically stable nations alongside the United States—they can then take large risks with confidence in unstable emerging markets and earn still more. In other words, Japanese stocks serve as their hedge.

For 25 years, Japan has been used as both a cash cow and a stepping stone.

The proof lies in the fact that in a market dominated by 70 percent foreign capital, whenever prices finally begin to rise after months of slow recovery, they immediately start talking about “overheating.” Yet when prices plunge straight into the depths of hell in a short period, they never once describe it as “overcooling.”

Last year, there was a case in which a top, prestigious corporation in a certain industry continued to fall so drastically that it seemed on the verge of bankruptcy. Shortly thereafter, the Tokyo Stock Exchange disclosed short-selling information. When I saw it, I was stunned. A leading foreign firm had short-sold an amount equal to 3.5 percent of the company’s total outstanding shares.

Even with a rough calculation, that single foreign firm must have earned over four billion yen in just a few months on that one stock alone. Paying a twenty-something brat an annual salary of 50 million yen would be pocket change by comparison.

Greed and evil acts always exploit the gaps in human hearts. The Japanese government and private sector—the very core of Japan, meaning my own classmates and seniors—have fallen into self-preservation and the narrow vision that comes with it. As part of what seems to be a Japanese tradition, despite being a capitalist nation, they have long despised the stock market itself, which is the foundation of capitalism. The result of this has been Japan’s “lost twenty years.”

And as a consequence of this, we are now faced with the tragic reality that one out of every seven people in Japan lives in poverty.

(274) John Lennon – Help Me to Help Myself – YouTube