I think there's a real fear that the treasury will take a big hit in the coming days, if not weeks. Japan sold off US treasuries in great quantity in the aftermath of the Kobe earthquake in 1995. Considering that we're still lingering in an economic malaise, this could create some major headache for Uncle Sam.
They're saying the Yen is rising because they are trying to repatriate funds to pay for rebuilding. This could be true if they need funds, they could sell treasuries. One thing is for sure. If they have to spend money on rebuilding they will not be purchasing treasuries in the same quantity in the future.
That means we need QE3,4,5 to soak up the loss in japanese demand. Buy all you can, max out ur credit card,mortgage your house,sell your wife and go long.
With BOJ offering their own QE as soon as Monday, I ain't so sure the rise of Yen is sustainable over time. Since Japan owns so much of our treasuries, once they liquidate it could potentially have a snowball effect. With that said, should Bernanke counteract by buying more treasuries?
BOJ plans multitrillion-yen operation Monday -Jiji (Reuters) - The Bank of Japan (BOJ) plans to offer several trillion yen (tens of billions of dollars) to the money market on Monday in an emergency market operation aimed at soothing market jitters after a massive earthquake and tsunami hit northeastern Japan, Jiji news agency said. This will be the central bank's first so-called same-day operation since last May, when the Greek debt crisis roiled the global financial market, Jiji said. The BOJ offered to supply 2 trillion yen ($24.4 billion) to the money market on a same-day basis for two consecutive working days in May. The BOJ said after the quake struck on Friday that it would do its utmost to ensure financial market stability and to smooth the settlement of funds, including through the provision of liquidity. ($1=81.92 yen)