The exchange rate of the US dollar to the Japanese yen has reached 149.74, and it even hit a high of 149.82 just two days ago.

As everyone was speculating whether the yen could hold the 150 threshold, the Bank of Japan unexpectedly announced a piece of news that took the global financial market by surprise.

The Bank of Japan announced that it would arrange additional purchases of government bonds on October 4th, including those with maturities from 5 to 10 years.

Now, it seems almost certain that the yen will break through the 150 mark.

Many might find it strange, wondering if the Bank of Japan has completely given up resistance? Is Japan willing to cooperate with the United States in this financial harvesting?

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In the traditional sense, currency wars refer to countries competing to devalue their currencies to promote the export of goods.

However, as the importance of the financial sector has grown, the United States has long played currency wars to a high degree of sophistication, not only can currency wars be triggered by interest rate cuts and devaluations, but even interest rate hikes and appreciations can also spark currency wars.

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It is important to note that one should not assume that the reason for the United States to raise interest rates is to control inflation.

In 2021, inflation in the United States had already risen, but the Federal Reserve did not raise interest rates. And this year, as inflation in the United States has gradually decreased, the Federal Reserve has not immediately stopped raising interest rates.These signs all indicate that the Federal Reserve's interest rate hikes are not intended to serve inflation, but rather to maintain the strength of the US dollar, push up the US Dollar Index, and thereby suppress non-US currencies.

For the United States, if it were to trigger a currency war, merely reaping small countries in Asia or Latin America would clearly be insufficient to divert the crisis.

Therefore, the United States' true target is very likely to be Japan.

However, it is strange that, unlike last year, Japan seems to have given up resistance now.

Last year, after the yen broke through 145, the Bank of Japan had already begun to intervene in the market, genuinely buying yen in the foreign exchange market with real money.

Later, although the yen continued to fall and broke through 150, the Bank of Japan did not give up and intervened twice more.

The three interventions last year cost a total of 9 trillion yen, but then successfully pushed the yen to keep rising, returning to around 130.

However, this time after the yen broke through 145, the Bank of Japan did not take any action. Now, as it is about to break through 150, there is still no sign of intervention.

Moreover, Japan has been buying US debt for two consecutive months, costing a total of 15.7 billion US dollars, equivalent to 2.2 trillion yen.It appears we can draw a conclusion that Japan cannot continue to support its currency exchange rate and may simply give up.

Is it possible that this round of currency wars has allowed the US dollar to achieve victory so easily?

If, after the US interest rate hike, Japan faces a severe currency war situation but has to continue quantitative easing, it is because the Bank of Japan hopes to stimulate domestic inflation in Japan.

Now that Japan's inflation has stabilized around 3%, Japan can appropriately tighten its monetary policy to cope with the pressure from the US dollar.

Why hasn't Japan taken action yet?

The latest data show that Tokyo's CPI in September was 2.8%, slightly higher than the expected 2.7%.

At the same time, the central bank's meeting minutes indicate that inflation will remain at 2.5% within a year, reach 2.2% after three years, and 2.1% after five years. From these data, inflation has actually reached the target range expected by the Bank of Japan.

Precisely because of this, many analysts believe that the Bank of Japan will tighten its monetary policy and raise interest rates in the future.

In fact, now is the most favorable time for the Bank of Japan to launch a counterattack against the US dollar.However, at this time, the Bank of Japan announced additional purchases of Japanese government bonds, which is equivalent to injecting more liquidity into the market again. Clearly, this is not tightening, but rather continuing to ease.

Japan's loose monetary policy is up against the tightening of the US dollar, which naturally leads to the continued depreciation of the yen.

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Japan's behavior of purchasing US Treasury bonds is also very puzzling.

Last year, when bailing out the market, Japan sold US Treasury bonds and further sold US dollars, thereby supporting the rebound of the yen.

But now buying US Treasury bonds is exactly the opposite, which is equivalent to suppressing the exchange rate of the yen.

Looking at the timing of purchasing US Treasury bonds, the United States has just resolved the debt ceiling crisis, and Japan seems to be trying to bottom fish for a rebound.

But now US Treasury bonds are falling lower and lower, and it is obvious that the $15.7 billion in US Treasury bonds purchased at that time are now in a loss, and Japan has been harvested again.