An analysis of the abrupt global market downturn and sharp yen appreciation in February 2016, exploring the hypothesis that China’s government deliberately triggered instability to stem capital outflows and restrain outbound consumer spending. The essay combines economic reasoning with firsthand observations in Kyoto.

February 12, 2016

Last night, the friend mentioned earlier called me once again.

“Your hypothesis—that the sudden market upheaval this time may have been orchestrated by the Chinese government—was entirely correct, wasn’t it? The weekly magazine reports stating that they were trying to suppress the ‘explosive buying’ by Chinese tourists visiting Japan must have been accurate. But the reason Chinese consumers buy so much abroad is that roughly 50 percent of the goods circulating on China’s domestic internet market are counterfeit. So even if the authorities blow the whistle, the people will not dance to the tune. Therefore, in order to rapidly replenish their foreign currency reserves—which had sharply declined due to massive capital outflows—they engineered this sudden plunge and turmoil in capitalist markets. If the yen appreciates by as much as ten yen in just ten days, that will inevitably put the brakes on the wallets of Chinese tourists flooding into Japan during the Lunar New Year. It was, in every sense, a masterful scheme.”

“Indeed, today, while I was photographing wild birds in Maruyama Park, there was a group that appeared to be Chinese right in front of me. They were enveloped in an utterly gloomy atmosphere, which left a vivid impression on me. Perhaps they were gripped by anxiety due to the market decline and the strengthening yen that occurred during their stay.

Moreover, on my way home via a back street after finishing the shoot, I saw a woman who at first seemed to have twisted her ankle. She had buried her face into her husband’s shoulder and was crying with an overwhelming sense of sorrow. Their son stood nearby, watching with an indescribably heavy expression. I wondered whether merely twisting one’s ankle could lead to such a scene of grief as I passed by. But if one assumes they were overwhelmed by despair over the economic outlook and future market conditions, the scene suddenly made sense.

Or perhaps they were travelers from Taiwan, people who had lost relatives in the recent apartment building collapse. It was that level of anguish. That is why we hurried past them.”

That was the conversation we had.