Einar Tangen: Japan's Economic Crisis & Why the U.S. Is Next

The U.S.-Japan partnership is weakening as Washington threatens tariffs and demands Japanese investment in U.S. agriculture, energy, and Boeing aircraft.

Japan may buckle to short-term U.S. pressure but will need to diversify away from the U.S. to survive long-term.

Japan never fully repented for WWII atrocities because MacArthur prioritized anti-communism over punishing fascists, allowing war criminals to return to power.

The 1985 Plaza Accord linked the yen to the dollar, making Japanese goods less competitive and forcing companies to build factories abroad, which hollowed out Japan's domestic economy.

Japan faces a push-pull currency dilemma where a strong yen lowers import costs for food and energy but hurts export competitiveness, while a weak yen does the opposite.

Japan's leadership has no clear economic plan and is ignoring this competitiveness trap.

Japan spent $50 billion defending the yen and threatened to sell U.S. Treasuries, which would raise U.S. borrowing costs. The U.S. government is already paying over a trillion dollars in interest, making a Japanese sell-off a major concern for Scott Bessent.

U.S. reindustrialization efforts are failing, with more industry and jobs leaving than being created. Long delays, higher costs, and a lack of domestic engineers for chip fabs show the strategy isn't working.

Japan's ruling faction, descended from WWII-era leadership, seeks to normalize Japan by rewriting its pacifist constitution and rearming.

They use China and North Korea as convenient enemies to justify this shift despite deep economic ties to China.

Japan's economy is decaying, with stagnant wages, rising living costs, and elderly citizens resorting to extreme measures to survive. The lifetime employment system has collapsed and young graduates no longer have guaranteed corporate jobs.

Japan and Europe lack indigenous AI development despite having technical expertise, due to a Western corporate ideology focused on maximizing short-term shareholder value. This extractive model prioritizes executive bonuses over long-term planning and societal benefit.

The 1972 Powell memo was a blueprint for wealthy families and corporations to take over the U.S. judiciary, media, think tanks, and universities. This led to corporations being treated as individuals with free speech rights, enabling unlimited political spending and oligarchic control.

Japan's debt-to-GDP ratio is 250%, heavily reliant on a carry trade where entities borrow at near-zero rates from the Bank of Japan to buy higher-yielding U.S. Treasuries. Unwinding this trade as Japan raises rates creates massive losses and threatens U.S. Treasury demand.

The AI bubble is unsustainable because Chinese open systems can deliver equivalent AI tokens for 50 cents compared to Anthropic's $30 pricing.

Over 50% of U.S. investment last year went into AI server farms, and a collapse would trigger a financial crisis worse than 2008.

China is building alternative financial systems like CIPS and setting up secure overseas gold vaults to back its trade currency, preparing for a potential run on the dollar. China keeps the yuan non-convertible for individuals but facilitates trade settlements and cheap borrowing against Chinese bonds.

China's Belt and Road initiative is shifting toward funding economically viable projects rather than government-to-government loans to avoid debt-trap diplomacy accusations. This project-based approach ensures continuity regardless of political changes and supports local job creation.

Countries worldwide are seeking to convert high-interest dollar-denominated debt into lower-interest Chinese dim sum bonds, draining U.S. capital pools. Sovereign dollar loans can cost 6-10% while dim sum bonds are under 3%, creating a structural shift away from U.S. financial dominance.