Expert Warns Speculators Target Yen, Risk of Repeating 1997 Asian Financial Crisis
Xie Guozhong, former Chief Economist for Asia Pacific at Morgan Stanley, warns that currency speculators are targeting the Japanese yen, potentially triggering a currency crisis similar to the 1997 Asian Financial Crisis. He points to Japan's weak economic fundamentals and high debt, which prevent aggressive interest rate hikes to support the currency, suggesting the yen could depreciate further.
📋 Article Processing Timeline
- 📰 Published: June 11, 2026 at 11:07
- 🔍 Collected: June 11, 2026 at 11:15 (8 min after Published)
- 🤖 AI Analyzed: June 11, 2026 at 11:16 (1 min after Collected)
(Central News Agency, reporter Zhang Qian, Hong Kong, 11th) Xie Guozhong, former Chief Economist for Asia Pacific at Morgan Stanley, warned that currency speculators are targeting the Japanese yen, a situation reminiscent of what happened in Thailand before the 1997 Asian Financial Crisis. He added that these yen speculators might be the same group active between 1996 and 1998.
Writing today as an independent economist in the Hong Kong Economic Journal, Xie stated that Japan is falling into a trap while trying to defend the 160 yen per US dollar exchange rate, a situation similar to Thailand's experience in 1996. Japan's massive foreign exchange reserves, rather than deterring currency speculators, have become their target.
The article states that Japan's economic fundamentals are weak and deteriorating, making further yen depreciation inevitable. However, due to Japan's high debt levels, it cannot support its currency through aggressive interest rate hikes and may fall into an "inflation-depreciation" spiral, generating huge profits for short-sellers.
The article suggests that some current short-sellers may be the same group that shorted East Asian currencies and triggered the Asian Financial Crisis between 1996 and 1998. However, their scale today is several orders of magnitude larger, requiring greater gains to satisfy their appetite, and Japan fits the bill.
According to the analysis, one factor working against the yen is that Japan has been accumulating foreign assets for decades to prepare for its aging society. The returns on its $3.5 trillion in foreign assets support Japan's financial stability, masking the negative impacts of a national debt twice the size of GDP, a fiscal deficit at 4.6% of GDP, and stagnant exports.
Another factor against the yen stems from Japan's trade account deteriorating due to declining competitiveness and increased defense spending.
The article states that Japan's exports may be entering a structural decline. Following electronics, Japan's most important export product, automobiles, is becoming obsolete. Additionally, US tariff policies are forcing some industries to relocate to the US, further compressing Japan's exports.
Conversely, Japan's imports are on the rise.
The article also notes that besides Japan, India and Indonesia are also targets for speculators. These countries have benefited from capital inflows rather than competitiveness, similar to Southeast Asia before the financial crisis. A clear sign is good GDP growth but weakening currencies.
The article argues that the world has entered a period of structural instability, with the existing order crumbling and a new one not yet established. Short-sellers amplify the chaos, and if they bring down a major country like Japan or India, the entire world will suffer severe disruption.
The article concludes that after the 1998 Asian Financial Crisis, it took Southeast Asia ten years to recover. This time, it could be worse. (Editors: Zhou Huiying / Qiu Guoqiang) 1150611
Writing today as an independent economist in the Hong Kong Economic Journal, Xie stated that Japan is falling into a trap while trying to defend the 160 yen per US dollar exchange rate, a situation similar to Thailand's experience in 1996. Japan's massive foreign exchange reserves, rather than deterring currency speculators, have become their target.
The article states that Japan's economic fundamentals are weak and deteriorating, making further yen depreciation inevitable. However, due to Japan's high debt levels, it cannot support its currency through aggressive interest rate hikes and may fall into an "inflation-depreciation" spiral, generating huge profits for short-sellers.
The article suggests that some current short-sellers may be the same group that shorted East Asian currencies and triggered the Asian Financial Crisis between 1996 and 1998. However, their scale today is several orders of magnitude larger, requiring greater gains to satisfy their appetite, and Japan fits the bill.
According to the analysis, one factor working against the yen is that Japan has been accumulating foreign assets for decades to prepare for its aging society. The returns on its $3.5 trillion in foreign assets support Japan's financial stability, masking the negative impacts of a national debt twice the size of GDP, a fiscal deficit at 4.6% of GDP, and stagnant exports.
Another factor against the yen stems from Japan's trade account deteriorating due to declining competitiveness and increased defense spending.
The article states that Japan's exports may be entering a structural decline. Following electronics, Japan's most important export product, automobiles, is becoming obsolete. Additionally, US tariff policies are forcing some industries to relocate to the US, further compressing Japan's exports.
Conversely, Japan's imports are on the rise.
The article also notes that besides Japan, India and Indonesia are also targets for speculators. These countries have benefited from capital inflows rather than competitiveness, similar to Southeast Asia before the financial crisis. A clear sign is good GDP growth but weakening currencies.
The article argues that the world has entered a period of structural instability, with the existing order crumbling and a new one not yet established. Short-sellers amplify the chaos, and if they bring down a major country like Japan or India, the entire world will suffer severe disruption.
The article concludes that after the 1998 Asian Financial Crisis, it took Southeast Asia ten years to recover. This time, it could be worse. (Editors: Zhou Huiying / Qiu Guoqiang) 1150611
FAQ
What is the main warning of this article?
It warns that speculators are targeting the yen, posing a risk of a currency crisis similar to the 1997 Asian Financial Crisis.
Why does Xie Guozhong consider Japan vulnerable?
He believes Japan's weak economic fundamentals and massive debt prevent it from defending its currency via rate hikes, making it a prime target for speculation.
Which other countries are flagged as at risk?
India and Indonesia are also mentioned as targets due to their reliance on capital inflows and weakening currencies.