Translator: Dreamscribe
"CEO-nim. It seems Japan has finally drawn its sword."
The situation everyone feared was becoming reality.
Japan announced export regulations on three core semiconductor items essential to our country, and even removed our country from the white list it had maintained until now.
It was the official beginning of a diplomatic war between Korea and Japan.
"What’s our country’s response?"
"For now, our governnt has also removed Japan from the white list. But aside from that, there’s nothing special. It’s probably because we don’t have any powerful weapon to strongly pressure Japan."
This was an expected sequence.
Japan could attack us with semiconductors, but we did not possess any regulatory card strong enough to counter them.
"What about Kangseong and NK?"
"They were already in contact with Kwangwoon Shipping before the incident broke out, operating an ergency contingency network. The problem is that the items in question have a high global market share held by Japan, so we’re sourcing from various places."
At least it was fortunate that, by quickly cooperating with Kwangwoon Shipping, we were temporarily pulling in supply from elsewhere.
"And with the establishnt of AMC and semiconductor factories in Hwaseong and Giheung, they were already researching dostic production of those items. If all goes well, that may play a significant role this ti."
They were responding one way or another.
But losses were inevitable.
If Japan cut off supply, it would cause disruptions in our country’s semiconductor production.
"Here’s the current stock market status. Due to the semiconductor issue, the dostic market overall has dropped. All semiconductor-related stocks have also been affected. Above all, the fact that foreign investors are reacting sensitively to the Korea-Japan diplomatic war is significant."
"Because they think Japan will inevitably win in the long term?"
"Yes. In the short term as well, and in the long term, it’s true that Japan has the upper hand. If they continue to pressure us through semiconductors, the one taking the damage will be Korea."
In contrast, the Japanese stock market rose slightly.
It certainly didn’t feel good.
"And this is the list of Japanese companies you requested last ti. The Research Team compiled a list of companies that might be worth investing in, based on their investigation."
Japan was currently a place where putting money anywhere might bring slight gains.
But that was the limit.
One shouldn’t expect major volatility here.
"Because of the YCC policy, they’re forcibly blocking interest rate hikes. That’s why the market has beco one with almost no volatility."
Japan was a country practicing zero interest rates.
The United States once followed that system but is now actively raising rates.
But Japan’s situation is different from the United States.
If Japan were to raise interest rates, there is a risk that the entire system they’ve built up could collapse at once.
So through the YCC policy, they were forcibly suppressing interest rates while also maintaining the value of the yen.
It would not be an exaggeration to say that the core of what people call Dobenomics lies in this YCC.
"The general evaluation is that the chance of the YCC collapsing is almost nonexistent, so it’s hard to expect any volatility for the ti being."
In short, if you want to invest in Japan, you shouldn’t expect high returns.
Why else would yen carry trades have erged?
Because you can’t make money in the Japanese stock market, everyone takes out loans based on the zero interest rate and invests that money abroad.
“.......”
I scanned through the report docunts provided by the Research Team.
As expected, nothing struck my instincts.
While the dostic stock market was greatly shaken by this diplomatic war, Japan remained calm.
As if the market itself had died.
Indeed, perhaps there was nothing worth salvaging here.
Muttering that to myself, I turned to the next page.
"......?!"
There was so much noise that it was hard to make out which stock was written on the paper, as if soone had scribbled over it with a black pencil.
In this bewildering sight, I just stared blankly at the paper for a mont.
"Perhaps if there's a stock you want to give investnt instructions for......"
After I stayed like that for quite a while, Departnt Head Seo cautiously spoke to .
That snapped back to my senses.
"Just a mont."
I separately marked only the stocks with the most severe noise among them.
When I brought the pen near such places, it felt as if soone was scribbling on my cornea.
Now, things had co to the point where my eyes were becoming strained just by selecting stocks.
“Here you go.”
I quickly handed the report over to Departnt Head Seo.
I considered checking a bit more, but at this rate, it felt like my cornea might really get ripped off and I could go blind.
“......Should we buy all of these stocks?”
If it ca with this level of noise and unpleasant feeling, it didn’t an to go long.
My intuition was telling .
That sothing capable of shaking up the Japanese market was approaching.
“Please short the stocks I’ve marked. Pull in as much as possible, to the maximum limit.”
“Uh, y-you’re going to short sell?”
Departnt Head Seo looked puzzled.
As ntioned earlier, the Japanese market was one with almost no volatility.
To place a massive short position there.
Even I knew that the risk was greater than going long.
Right now, the Japanese stock market was rising ever so slightly.
“But if you say so, CEO-nim, there must be a reason. However, there are quite a few stocks you've marked, so it may take so ti. We also need to check the available volu. How much capital should we allocate.......”
“We have about 6 trillion won we can manage, right?”
“Yes. After the Tesla incident, the increased amount totals around that.”
6 trillion won.
It was truly a large amount.
But when it ca to the global scale, even 6 trillion won wasn’t considered a huge amount.
There were fund companies managing close to ten quadrillion won.
However, if that money were to be poured entirely into the Japanese market, it was more than enough to exert real influence. I briefly calculated the amount to invest.
No need to drag it out, as soon as I decided to use the full 6 trillion won, a response ca imdiately.
“Invest it all.”
***
At Gold Reagan and other global securities firms, a clear rank system was established to allow step-by-step advancent.
It was thoroughly performance-based, and after starting as an analyst and getting promoted to associate, the path to vice president would open.
Here, the title of VP, or vice president, was a bit different from Korea’s version.
They were actual middle managers, and there were many VPs.
Then what’s the next step beyond that?
It was MD.
In Korean terms, that would be equivalent to senior managing director.
Only those VPs who showed outstanding performance could advance.
"......From Kwangwoon again?"
“Yes. They're currently looking into large-scale short selling positions on the Japanese side.”
At Gold Reagan, MD Reynold Vale had given all teams one common instruction.
That was to report directly without fail whenever Kwangwoon showed any unusual movent.
Who is Kwangwoon?
In this industry, it’s a na so well-known it needs no further explanation, and at the sa ti, it’s a mysterious one.
Europe, Asia, and even the United States.
There was nowhere Kwangwoon hadn’t touched.
And wherever they passed, it felt as though a massive storm had swept through.
So there were many nicknas for Kwangwoon.
Nightmare, architect, chaos, and so on.
But the nickna Reynold Vale used for them was only one.
‘Black Swan.’
Sothing unpredictable, but once it appears, its impact is beyond imagination.
“But why are they suddenly turning to Japan?”
“This ti, Korea and Japan are engaged in a diplomatic war.”
“What does a diplomatic war have to do with this? Wasn’t it a one-sided ga anyway? Japan holds the overwhelmingly favorable position.”
But the fact that soone was shorting Japan in large quantities clearly ant sothing was going on.
“No issues on the Japan side?”
“Nothing in particular.”
That was odd.
“Really nothing? Otherwise, why would they suddenly start massive short selling over there?”
“Could it be that the Korean governnt is preparing so kind of hidden card?”
“No way.”
Gold Reagan had already finished its own analysis.
Korea had no factor capable of delivering a counterstrike to the Japanese governnt.
At most, they could exploit public sentint to reduce the number of tourists or launch boycotts against Japanese products, but compared to Japan’s core semiconductor offensive, those actions were weak.
“And yet they’re pouring this much money into it.......”
“According to so reports, a certain force is also taking a large short position on the yen in the FX market.”
It wasn’t revealed who that force was, but it wasn’t hard to guess that it was Kwangwoon.
Which made it all the more puzzling.
Kwangwoon was a highly aggressive investnt firm.
Aside from company acquisitions, they never poured in capital from a long-term perspective.
That’s why this was so strange.
“Is this the list?”
“Yes. These are the stocks Kwangwoon is looking to short.”
Vale looked through the list.
“......There are quite a few related to banking stocks?”
“Yes. Alongside major export companies, a good number of bank-related stocks are included. On top of that, they’re also moving money into the bond sector.”
“If it’s bonds...... wait a mont.”
That’s where Vale felt he had found a clue.
“If it’s 10-year bonds...... then it’s closely tied to the YCC, isn’t it?”
YCC.
Japan’s policy to maintain interest rates at 0%.
The core of that policy was Japan’s 10-year governnt bond.
If there’s strong selling pressure in the market for 10-year governnt bonds and prices start falling, pushing interest rates beyond the target range, the Bank of Japan steps in to buy large quantities of those 10-year bonds.
By purchasing the bonds, demand rises, prices go back up, and interest rates fall again to remain within the target range. That’s how the system works.
“Kwangwoon is trying to short bonds, and at the sa ti looking for short positions in banking stocks in the Japanese market......”
As scattered puzzle pieces started falling into place, the picture finally began to form in Vale’s mind.
“Kwangwoon is trying to collapse the YCC!”
“But...... isn’t the YCC too large a system to collapse? The Bank of Japan has a firm grip on it.”
“Of course. But Kwangwoon doesn’t think so. They must believe Pri Minister Dobe’s Dobenomics is hitting bottom, and the YCC has reached its critical point.”
Still, as the employee said, the YCC was too large a system to bring down.
The Japanese governnt wasn’t foolish. They wouldn’t have built the YCC system with weaknesses.
In other words, so kind of trigger was needed to bring down the YCC system.
“But is there anything like that right now?”
No matter how hard Vale thought, he couldn’t co up with anything that could act as the trigger.
“There’s sothing else. There are so funds that have asked to be inford if Kwangwoon tries to take a major position. What should we do?”
More and more groups had started to follow Kwangwoon after witnessing its shocking investnt capabilities.
To be precise, they were followers of CEO Jung Jin-ho, the man leading Kwangwoon from behind the scenes.
Especially the more aggressive bear funds held Jung Jin-ho in the highest regard, and for good reason. He had achieved countless successes through investnt strategies so bold they couldn’t even imagine.
He was an investor who had only ever won through the kind of high-risk, aggressive investnt they had only fantasized about.
That’s why they were deeply curious about Jung Jin-ho’s next move.
And the fact that such a large position was being taken now clearly ant Jung Jin-ho was the one commanding it.
For the groups that followed him, it would be the best possible news.
And then, suddenly, a thought occurred to Vale.
Perhaps Jung Jin-ho had even factored in the movents of these follower groups into his calculations from the very beginning.
“Leak the rumor for now. And check if we can set up a similar position to Kwangwoon’s.”
Given risk managent concerns, they probably wouldn’t be able to invest a large amount.
But the bear funds who heard the rumor were full of reckless types who didn’t think about the consequences, so they’d surely charge in blindly behind Jung Jin-ho.
That way, they could collect fees, and if they were lucky, make so profit on the side too. Still, one question remained.
“Just throwing money at this isn’t going to make it work, is it?”
To make this happen, a trigger was necessary.
So kind of incident would need to occur that could strike a blow to Japanese companies.......
“I have no idea.”
Over the years climbing up to this position, he’d often been told he was a born investor.
But once you face the real thing, you co to a realization.
In the end, he was just an ordinary human being.
***
Every country has a central bank.
And for Japan, that was the Bank of Japan.
Its role was to align with the governnt’s policies, adjust interest rates, and ensure the economy stayed stable.
But in truth, the Bank of Japan didn’t have much to do.
They had maintained zero interest rates for a long ti, and under the YCC policy, all they had to do was perform their duties chanically.
No new ideas were necessary.
That was the nature of Japan.
Maintaining the status quo.
Neither growing nor collapsing.
Just holding its position.
That was the culture of Japan.
They had already tasted severe bitterness once before when the bubble burst.
Perhaps that’s why.
Governor Takeyama of the Bank of Japan was growing weary of the sa daily routine.
“W-what on earth is going on? Why are the yen and governnt bonds dropping?”
But was it perhaps the heavens trying to soothe his boredom?
Sothing that should never have happened- no, sothing that couldn’t possibly happen, had happened.
“There was already a force that had held short positions for quite so ti.”
“I knew that much too. But this is way too large in scale!”
“It seems the recent U.S.-China trade war served as the trigger.”
The trade war between the United States and China.
The two countries had been sharpening their knives ever since President Trump took office.
Then, as a full-scale trade war broke out, Japan, previously just watching from the sidelines, had its back broken like a shrimp caught in the middle.
“There are a lot of goods we export to China, but due to the tariff war, Chinese companies were all hit at once and completely halted their imports.”
Because of increased taxes, Chinese companies could no longer source goods from the U.S., and they were also forced to stop using raw materials they had been importing from Japan.
“Most of all, the logistics are a disaster. Shipping schedules got delayed all of a sudden, incoming goods stopped arriving, and outgoing goods are stuck. Ports are a ss, overloaded with cargo.”
To make matters worse, the logistics crisis had now spread damage to other companies, and fear had begun to grip the once-calm market.
“And then, short-selling forces delivered the final blow, causing everyone to panic sell.”
“The biggest problem is that too many forces have entered the market. Bear funds have sward in all at once to attack, and prices simply can’t be defended.”
In truth, based on the problem alone, the market shouldn’t have been shaken this badly.
But with funds full of malice pouring into the market and launching a coordinated assault, the panic selling only accelerated.
As a result, even institutions unrelated to the bear funds were swept up in fear and began liquidating their positions.
“S-so can we defend against this?”
To avoid raising interest rates, they needed to stop the falling bond prices.
Which ant they had to buy large amounts of bonds, but it was already beyond what they could handle.
And it wasn’t just bonds, they had to defend the yen as well, aning they’d be spending money twofold.
“If this continues... we’ll be forced to raise interest rates. In fact, the bank is already beyond its capacity to handle it.”
“How much would we need to raise them?”
“At least 3 to 5% for things to stabilize.”
At that, Takeyama tightly shut his eyes.
Cold sweat poured down his face.
Governnt bond interest rates are the base temperature of an economic system.
If they suddenly rise, the borrowing costs for governnts, companies, and households all go up. That leads to reduced investnt, lower consumption, falling asset prices, and eventually a widespread economic downturn.
That’s why stable managent of bond rates is so critical.
But raising rates by 3 to 5% would an, in simple terms, abandoning the YCC.
And if a country that had maintained zero interest rates suddenly made such a big move, corporations and real estate would collapse one after another.
If they didn’t intervene out of fear of that happening?
Then a catastrophic tsunami would sweep across all of Japan.
The previous Japanese bubble collapse would look like a joke in comparison.
“.......”
Takeyama paused in thought.
No, it wasn’t even a situation where he had the luxury to think.
“Prepare a press conference. We have to put out the fire, sohow.”
The executives moved swiftly.
“.......”
Left alone in the conference room, Takeyama blankly stared out the window at the scenery beyond.
The fact that so many forces had launched a simultaneous attack ant that soone was orchestrating things from behind the scenes.
There was no way to know whose command had driven Japan this far into a corner.
They didn’t have the capacity to find out right now.
But one thing was certain.
That Japan, like cherry blossoms, was rapidly falling in the storm soone had deliberately created.
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