The rapidly escalating tensions between China and Japan over the disputed Senkaku islands has just gotten real, as the Telegraph’s Ambrose Evans-Pritchard reports that a Chinese advisor has publicly called for the nation to DUMP en-masse it’s entire holdings of Japanese bonds. All $230 billion!
It appears the Fed’s QE∞ of $40 a month (+ PRN printing) may soon become $1.14 TRILLION a month should China decide to also dump it’s $1.1 Trillion in US treasury bond holdings, which appears like a likely progression considering the US announced Tuesday that it will back Japan should the nation be attacked over the disputed islands.
Beijing hints at bond attack on Japan
A senior advisor to the Chinese government has called for an attack on the Japanese bond market to precipitate a funding crisis and bring the country to its knees, unless Tokyo reverses its decision to nationalise the disputed Senkaku/Diaoyu islands in the East China Sea.
Jin Baisong from the Chinese Academy of International Trade – a branch of the commerce ministry – said China should use its power as Japan’s biggest creditor with $230bn (£141bn) of bonds to “impose sanctions on Japan in the most effective manner” and bring Tokyo’s festering fiscal crisis to a head.
Writing in the Communist Party newspaper China Daily, Mr Jin called on China to invoke the “security exception” rule under the World Trade Organisation to punish Japan, rejecting arguments that a trade war between the two Pacific giants would be mutually destructive.
Separately, the Hong Kong Economic Journal reported that China is drawing up plans to cut off Japan’s supplies of rare earth metals needed for hi-tech industry.