FX Charts Reaching Turmoil Zone

Something Brewing in South Korea?

The won looks weak, with a possible major bearish breakdown in play. It only looks good versus the yen.

USDKRW

Back above resistance. A move above 1345 will open up a renewed bullish outlook for the cross, and would be bearish for global financial markets.

East Asian Currency Meltdown

I measure a 1000 point move from the top to bottom of the triangle (counting the 1997 peak down to 2007 low). If the whole triangle, the target would push out towards 2500. The former seems "insane" enough for me.

Singapore dollar also looks in trouble if USDSGP can break out of that pattern.

Somebody Noticed the Yen and Yuan

ZH: Yen At Risk Of "Explosive" Downward Spiral With Kuroda Trapped... And Why China May Soon Devalue

The yen's recent nosedive has heightened fears of a vicious cycle as Japan's worsening current-account balance threatens to spur more selling while the BOJ's dovish scramble to prevent rates from blowing out means that even modest countertrend buying will promptly reverse.

While a soft yen has long been seen as a boon to Japan's economy, not to mention the stock market, and was one of the key drivers behind the launch of Abenomics whose anchor pillar was printing ginormous amounts of yen (and monetizing just as massive amounts of JGBs to monetize Japan's prodigious deficit), now that benefits have tilted toward certain exporters and the wealthy while individuals and small businesses feel the pain of higher commodity prices, Japan may need to rethink a fundamental assumption of its economic approach.

As argued here, inflation is a yen killer. If yen tanks, then what do Korea, China and Europe do? All of them are also energy importers, plus food for Japan and Korea.

But while Japan may be a lost cause, a bigger question emerges: how will Japan's latest devaluation impact its fellow exporting powerhouse competitors, i.e., China, and as Edwards frames it, "this beggars the question how will China react? Maybe just like they did in August 2015 when the PBoC devalued? Back then persistent yen weakness had dragged down other competing regional currencies and left the renminbi overvalued."

Wait, yen weakness leading to China devaluation? According to Edwards, that indeed was the sequnece: as he shows in the chart below, the super weak yen of 2013-15, by driving down other competing Asian currencies, ultimately led us to the August 2015 renminbi devaluation.

Yen and yuan both strengthened as soon as the yen made it into headlines and financial media attention, but barring a major reversal in King Dollar, this will only be a consolidation. More over, both currencies are at major turning points. USDJPY's next up move will clear a 20-year base and USDCNY sits right below a decade-plus support line. Since China has said it won't follow Japan in the 1980s, then it isn't going to let its currency appreciate...even if that was in the cards.

I've argued for years that the yuan can experience a major devaluation. Nothing in the fundamental economic argument has changed. If anything, Europe's reaction to Russia's invasion of Ukraine has made the euro far weaker than it was. I had previously expected the yen and euro could absorb some currency flight from a yuan devaluation, but now it looks like the dollar may rise alone in a scenario where nearly all fiat currencies collapse.

Socionomics Alert: Shift in Social Mood Underway, South Korea and Guatemala Reject Feminism, LGBTQ

Socionomics tells us to expect an ultra-extreme reversal in gender politics. We are inside of an already 20+ year negative wave of mood and the reversal could be as long-lasting. The example I like to use is consider the drug use and androgyny of the 1970s against Rambo and the Terminator in movies and "Just Say No" in drugs. The reaction against infinity pronouns and transgenderism is going to be look something like the abolishment of feminism. There will be extremely rigid and defined gender roles for male and female like no one has seen in decades, if not hundreds of years. Sodomy could be made illegal again. It's possible feminism itself will be abandoned in the next positive mood wave that comes out of this one.

For now, this is not a sign that mood is turning. The trend is still negative. Instead, this is more an indicator of what may come when mood finally shifts. What the positive mood cycle might look like when it finally gets underway.

The reversal is getting started overseas. South Korea swung conservative this week and now Guatemala is passing laws against abortion and LGBTQ.

UnHerd: South Korea’s incel election

While sexism in South Korea is nothing new, the aggrieved misogyny animating young men is of a more recent vintage. In their 2019 book Men in Their 20s, journalist Cheon Gwan-yul and data scientist Jeong Han-wool found that the young generation’s misogyny was marked by over-the-top hostility against feminism: 58.6% of South Korean men in their 20s said they strongly opposed feminism, with 25.9% rating the intensity of their opposition as 12 on a scale from 0 to 12.

Unlike older men, who held to a patriarchal worldview defined by rigid gender roles, young men reject the sense of masculine duty that typically accompanies old-school sexism. Rather, they see themselves as victims of feminism and define themselves politically by this sense of victimisation.

ABC: Guatemala increases abortion penalty, bans same-sex marriage

On Wednesday, which Guatemala’s Congress declared “Life and Family Day,” President Alejandro Giammattei said in a speech at the National Palace, “This event is an invitation to unite as Guatemalans to protect life from conception until natural death.”

Guatemalan women convicted of terminating their pregnancies can now face sentences up to 10 years that before were a maximum of three. The Congress imposed even heavier penalties for doctors and others who assist women in ending pregnancies.

Abortions are legal only when the life of the mother is at risk.

Lawmakers backing the legislation said the law was necessary because “minority groups in society propose ways of thinking and practices that are incongruous with Christian morality.”

Some policy shift is also emerging in the U.S.

CBS: Florida Governor DeSantis defends controversial "Don't Say Gay" bill

The Western media will be near useless when it comes to explaining trends because, like in the piece on South Korea, they will just blame it on racism. I mean misogyny or homophobia. Or whatever word is popular at the time. There is no introspection about Baizuo policies, their cause and effect, or even a basic understanding of how success works in politics. Trying to press a victory beyond its goal ends up creating new oppression, as is the case with feminist policies. Most college campuses, for example, continue pushing programs for female enrollment (though there are outliers) while data showing male enrollment dropping clearly indicates they have gone too far and now made college campuses hostile to men. Pointing this out is met with screeches of misogyny and reactionary increasing of feminist policies. With the bill in Florida, the law is against teaching sexual topics to young children. It is now an issue of who is protecting and harming little kids, and the LGBTQ community is starting to come off like pedophiles in their zeal for pushing these issues into kindergarten level. Thus victory becomes defeat because the reaction isn't going to be short-lived when mood shifts, it's going to be a massive reversal. 

When social mood shift, it looks for targets. As I have pointed out with secession, the most likely targets are where there is an advanced secession movement. With something like culture, the "squeaky wheel" gets the grease. Extreme cultural trends will meet extreme reversal, while those that are "sleeping dogs" will probably be left alone until the positive mood wave becomes extreme. The transgenderism pushing into female sports, for example, could well open up questions about the existence of female sports because, prior to feminism, female sports weren't as big of a thing. 

Geopolitics will also play a role. One moniker for the American Empire is the "Globalist American Empire," the GAE. The U.S. State Department is a major advocate of feminism and LGBTQ all over the world (shoving it down the throats of Afghanis was an all-time backfire). Russia and China are purposefully anti-GAE in every respect, with Russia turning back to Orthodox Christianity and China focused on moving closer to traditional gender roles among other issues. As U.S. power wanes, so too will its spread of modern sexual ideology. More countries will reject U.S. culture for traditional culture. Eventually, the "revolution" will come home to the United States.

Understanding the geopolitical dimension helps clarify why Baizuo seem to be going for broke against Russia and likely soon China. Why the Russiagate scandal made sense in their warped minds. They realize their domestic political enemies and some of their foreign enemies are closer in terms of religion and culture to each other, than either is to the Baizuo. The press likes calling Putin unhinged and crazy, but the regime behaving more erratically is ever more paranoid and neurotic Baizuo. Had the conservatives in the USA not bought the anti-Russian propaganda hook-line-and-sinker, Baizuo paranoia might already be going off the charts. Extreme ideas such as transgenderism are very core to the Baizuo identity and if you see the world as pro- and anti-trans, it is easy to see how Putin and a Trump voter, or perhaps Putin and J.K. Rowling (a feminist against some of the trans excess), are somehow allied in their minds.

South Korea Opposition Wins Election

A move to the right amid rising geopolitical tensions. S.Korea Conservative Opposition Candidate Yoon Wins Presidential Election -Yonhap

Dollar Breakout vs Won

The deflation/recession argument is winning in some markets, while the inflation argument (crude oil) is winning in others. On net I remain on the deflation side, with crude as the "show me" asset. Cannot rule out something totally new either, because correlations can break permanently in secular market shifts. For example, maybe demographics catch up with Japan and Europe and we get a world where inflation and the U.S. dollar crossrates rise together. Looking at the won, there are touches of resistance in the Asian Crisis, 2008 financial panic, 2020 pandemic crash and now. An overshoot like in 2008 and 2020 could be coming, or a major breakout. Either way it is short-term bearish if USDKRW goes higher.

East Asia Popping Bubbles

ZH: South Korea Unexpectedly Hikes Rates On Growing Housing, Debt Bubble Fears

Overnight, South Korea became the first major Asian economy to raise interest rates since the start of the pandemic, as record household debt and soaring housing prices outweighed fears over Seoul’s struggle to contain the Delta coronavirus variant. In the closely watched decision on Thursday, the Bank of Korea raised its benchmark rate by 25bps to 0.75%, increasing the seven-day repurchase rate 25 basis points from a record low of 0.50% with a majority vote.

Reuters: China's property crackdown stalks credit markets

China's push to wean property developers from excessive borrowing is spilling over into loan losses at banks and pain in credit markets as cash-strapped builders fall into distress, raising the risk of fallout rippling across the economy.

Debt and land-buying curbs and hundreds of new rules are hitting developers far harder than they had expected, setting off a scramble to sell assets as well as a steady drumbeat of bankruptcies, defaults and cut-price takeovers.

The regulatory push is the latest in years of efforts to reduce risks in the real estate sector and, as with crackdowns roiling the internet and education sectors, has not been formally announced.

China's economic outcomes aren't always intentional, but the CCP is clearly risking a financial event with current policies. A good question is whether, fresh off their coronavirus "victory" —being seen as handling the virus far better than the USA— China isn't also aiming for a global financial panic "victory?" The CCP would maintain political control through a panic or global recession with its crackdown on corporations already in full swing, while the floundering Baizuo administration in Washington descends into utter chaos as the wheels fly off the economy, stock and crypto bubbles simultaneously.

Submerging Markets

Brazil, China and South Korean currencies all reversing vs USD at important levels.

A breakdown in any of these currencies might be enough to carry emerrging market ETFs through suppoort and into a larger correction.

Where are the Bubbles? South Korea Edition

Reuters: S.Korea to tighten property curbs as home prices surge

The median apartment price in Seoul was 920 million won ($759,873) as of May, having increased every month so far this year through the course of the coronavirus outbreak. They are up about 52% since Moon took office in 2017.

Bloomberg: South Korea Urges Officials to Sell Their Second Homes as Prices Fuel Anger

Prime Minister Chung Sye-kyun, a Moon appointee, urged high-level officials Wednesday to sell such properties as soon as possible. The demand comes after rising discontent over prices prompted fresh scrutiny of the property holdings of senior Moon administration officials, including his chief of staff.

“If high officials own multiple properties, it is difficult for us to earn trust from our people,” Chung told a meeting of top government officials. “High-level officials must set an example. To be honest, we should have done this a lot earlier.”

Home prices have continued to surge in some parts of the country, despite a series of property-related measures launched by Moon since he took office in May 2017. Moon pledged an “endless” stream of steps in January, after earlier moves -- including higher property taxes, tighter lending rules and limits on using mortgages to buy apartments -- failed to stop the rise.

Reuters: Lost Seoul: South Korean middle-class dreams spoiled by soaring house prices

Even with unemployment spiking as the coronavirus pandemic swept South Korea in February, Baek Seung-min asked his wife to quit her nursing job to help reach a dream they had spent a lifetime chasing: buying their own apartment.

The 35-year-old interior designer said giving up his wife’s 58 million won ($48,000) salary would improve their chances of securing a property after the government introduced a host of measures aimed at cooling rampant property prices.

The unusual plan was to cut his wife’s income for a while so the couple’s annual earnings were low enough to be eligible for a quota system in new property developments designed to give more low-income newlyweds access to housing.

Even so, Baek and his wife decided to settle two hours west of his Seoul workplace in Incheon, where borrowing rules were looser and apartments far cheaper.

“Seoul home prices grew way out of reach, we had to go all the way to Incheon to buy our place,” Baek said. “The government is crushing our dreams when they curb loans and tell us not to buy homes, it enrages me.”

Achyde: Persistent real estate inflation weakens South Korean President Moon Jae-in

Another cause of inflation is the so-called “Jeonse” system, specific to South Korea. In this context, the tenant does not pay rent, but pays a deposit of between 50% and 100% of the total price of the accommodation when moving in, which he recovers at the end of the lease, generally for two years, if he leave the accommodation. In the meantime, the owner has made the money grow, sometimes by investing in a new property.

Coronavirus Update: India Bans Drug Exports, US Cases Spread, HSBC, Seattle Ghost Town or Not?

Comment for today: I think the peak negative news flow is coming over the next month. Markets will anticipate and sell ahead of the peak in case growth. We are entering a highly volatile phase both in public and market reaction.

A long, good post at HedgeEye. You have to give your email to read it, I suspect it might be on ZeroHedge in a day or two: Why COVID-19 Is Unstoppable (Yes, Even in China)

There are no good options. Essentially, China has to steer a path between Scylla and Charybdis—and it has to prepare for damage from either side. However long China can bear to suppress activity, I don’t believe it’s possible for China to prevent a nationwide epidemic in the weeks and months to come.

Estimating the ultimate death toll depends on our assumptions. First, let’s assume that the ultimate community infection rate is somewhere between 30% and 70%. Next, let’s assume that the population-wide case fatality rate is somewhere between 1.0% and 0.5%. That will generate total deaths of somewhere between 2 million and 10 million.

Hiroshi Nishiura, an epidemiologist at Hokkaido University in Sapporo, Japan, uses a model that generates a result in this range. Nishiura estimates that the outbreak in China will peak sometime between late March and late May. At that point, up to 2.3 new infections will occur on a single day. Roughly 40% of the population will get infected, and half of all cases will show no symptoms. Assuming a high and low case fatality rate, that’s a death toll of 3 to 6 million.

This is not alarmist, but it doesn't bank on any luck such as a warmer spring (and heat weakening the virus, still somewhat of an unknown from what I've read...). The article does later go on to say a favorable mutation that makes the virus less lethal is also possible and even likely (given that most mutations break that way).

Travel bans spreading, this time Australia. Coronavirus outbreak forces travel ban for South Korea, extra checks for travellers from Italy amid coronavirus outbreak. Nobody has jumped ahead of the curve yet and preemptively banned travel to the USA.

SCMP: Coronavirus: ‘recovered’ patient dies as China reports discharged cases falling ill again

A 36-year-old man has died of respiratory failure in Wuhan, five days after being discharged from one of the makeshift hospitals built to contain the outbreak, according to a report by Shanghai-based news portal The Paper.

The report, which was later removed, said Li Liang had been admitted to the hospital – built to treat patients with mild and moderate symptoms – on February 12, according to his wife, surnamed Mei. He was discharged two weeks later with instructions to stay in a quarantine hotel for 14 days.

财新: 复阳疑云：新冠患者出院后死亡事件始末 has more details, behind their paywall, but no explanation yet for the death. Need to wait for more info.

CityAM: HSBC evacuates dozens from Canary Wharf HQ after employee contracts coronavirus
Chris Martenson (who has the best daily update vids if you're interested) discusses the #FakeNews on masks. Another shining example of media and govt failing at their most basic jobs.
SCMP: Coronavirus: South Korea’s aggressive testing gives clues to true fatality rate

And while experts caution that it is still too early to draw firm conclusions, the picture emerging in South Korea – which has the most confirmed cases outside China but with a more transparent political environment – suggests the virus could be less lethal than patchier data emerging from elsewhere.
“If we can test more people – whether they have no symptoms, mild or severe disease – the results, including the case fatality rate, are more accurate and representative when the whole disease spectrum is taken into consideration,” said David Hui Shu-cheong, an expert in respiratory medicine at the Chinese University of Hong Kong. “Most countries just focus on testing the hospitalised patients who obviously have more severe disease, and [thus] the fatality rate is high.”

NBCNews: Seattle feels like 'ghost town,' business owners say as they face life in coronavirus hot spot

Rantz: Rantz: Seattle unifies to mock coronavirus ‘ghost town’ report by NBC News

The Guardian: India limits medicine exports after supplies hit by coronavirus

The restricted drugs include paracetamol, antibiotics such as tinidazole and erythromycin, the hormone progesterone, which is used in the contraceptive pill, and and vitamins B12, B1 and B6. The drugs account for 10% of all India’s pharmaceutical exports.

India is one of the world’s largest producers and exporters of drugs, with the US and Europe heavily reliant on the supply.

India’s pharmaceutical companies source about 70% of their ingredients from Chinese factories, many of which have been shut for weeks owing to the coronavirus outbreak. The closure of airports in China has also impeded supplies reaching India.

Finally, risk of policy overshoot is rising, particularly where governments are trying to use money printing to prop up markets or deal with supply-shocks that cannot be fixed by money printing. This could create an inflationary boom when the virus lifts, one that eventually busts and could trigger the next recession or bear market.

And, from #Korea, confirmation of our view that money pumping is more likely to do harm than good:-#Fed #ECB #BOJ pic.twitter.com/ZMUIxtPz8f

— Cantillon Consulting (@CantillonCH) March 5, 2020

Bears Will Feast If This Correlation Holds Up

The Korean won is key currency for global trade and is heavily influenced by China, it's largest trading partner. USDKRW formed an inverse head-and-shoulders pattern that could carry it to a breakout at around USDKRW 1250. This is key because that in turn completes a basing pattern that points to another 15-20 percent upside in USDKRW.

KRW will probably weaken more then CNY, but that too will likely decline double-digits if this scenario unfolded. Hence, my general bearishness on markets and willingness to sit tight with a heavily-leveraged short portfolio with the risk of a melt-up rally constantly stabbing at my amygdala.

I came across something today that totally confirms my bias. Which is to say, I'm biased. But if you don't see the USDKRW pattern, this chart comports with crazy target of USDKRW around 1450-1500 when this is all over.

The chart doesn't have a clear x-axis, but if the correlation holds, it looks like 6 months of hell is about to unfold for anyone who isn't short various asset classes and long U.S. dollars. I suspect gold will do well, but not as confident. There could be an initial sell-off as the "strong dollar, weak gold" traders and investors are flushed from the market.

South Korea on Edge

I was going to release this post later in the week, but seeing as the Kospi fell on Monday while the rest of the world's stock markets are rallying...

The bearish case for South Korea (stock market and currency): it is reliant on exports to China and the Chinese economy is in a cyclical slowdown, not a trade related blip. The prime macro asset here is the U.S. dollar. A China/global slowdown includes a stable/rising U.S. dollar. Given the position on the charts, one could take the other side of the argument. I believe the downside for $EWY exceeds the upside in a bullish scenario, there are likely better assets for those bearish on the dollar and bullish on emerging markets/China, but South Korea is still a great indicator.

Roughly half of South Korea's economy is exports and of that, more than one-quarter go to China.

Given the trading relationship, the won has been highly sensitive to the Chinese economy, but has become even more sensitive as speculators look for currencies that will suffer from a Chinese currency devaluation.
Reuters: South Korea's won is Asia's whipping boy in U.S.-China trade war

As trade tensions flared up between the world’s two largest economies last month and the Chinese yuan threatened to fall past the key 7-per-dollar level, the won slid to near 1,200 per dollar, its lowest since January 2017.

“The won is like a proxy currency to not only global growth sentiment but one that’s also related to U.S.-China trade talks,” said Park Sang-hyun, chief economist at Hi Investment & Securities in Seoul.

“It won’t be easy to keep the dollar/won level of 1,250 should the U.S.-China spat intensify, with possibly additional tariffs, for example.”

The won corrected along with the yuan and U.S. stocks in June, but all three remain in bull markets.

There's no end to the bull-bear debate over the U.S. dollar. One bearish case for the greenback is the Fed unleashes global quantitative easing and rescues the ECB, BOJ and PBoC. It goes from being "the cleanest dirty shirt in the laundry" to the dirtiest. Another dollar bearish scenario is the 10-year depression ends and inflationary growth returns. This could include stagflation in the developed economies, but primary industries (mining, agriculture, energy) are much larger portions of emerging market economies. They should see positive growth. Finally, the dollar has followed a roughly 18-year cycle going back to the 1980s, with roughly equal parts bull, bear and consolidation. The current bull market began in 2014 and would be likely to terminate over the next 12 to 18 months. It could dip and retrace back to current levels as it did in the early 2000s, but would not make a meaningful new high.

The charts also raise the possibility of an explosive (catastrophic for the global economy) dollar rally. If the Fed cuts rates, but the global central banks have to initiate extraordinary monetary policy because they have less room top cut (ECB,BOJ) or because their economies will suffer far greater losses in a recession (PBoC), the dollar should rally as it did in the early 2000s recession and during the 2008 financial crisis (yen being a potential outlier). Multi-year and multi-decade basing patterns are within striking distance even after the recent pullback in the dollar. The flipside of a dollar breakout would be inflationary pressure overseas as currencies devalue against the U.S. dollar. The extreme case is an echo of the 1930s when global currencies devalued versus gold. The country most similar to 1930s USA is China, but with more debt, less productive investment of that debt and worse demographics.

Along with the macro and currency case for South Korea, the South Korea ETF is at an important resistant level.

The China ETF is at a similar point.

There are only a handful of South Korea ADRs and even fewer with ample trading volume.

Tariffs Attacked, Dirty Trade Tricks Ignored

ZH: Chinese Ports Begin Delaying Clearing Of US Goods

Meanwhile, a commodities trader in Shandong province said he was told by customs officials that the clearance of goods from the US that are on Beijing's "list" will be delayed. Among the goods being targeted by tariffs, transportation equipment, electronics and agricultural products, among others, were high on the list. American fruit, pork, nuts, wine and - of course - soybeans, with a 25% tariff. The chart below from JP Morgan is a rough breakdown of expected tariffs by industry (however, some of the announced tariffs have yet to be implemented).

The United States retaliates openly to hidden trade violations. China, and many other nations for that matter, violate the spirit of free trade. Local companies are favored, foreign companies are targeted for technology and capital acquisition. In a nationalist system, nations pay the price for their own bad behavior, but in a globalist system, they gain an advantage by defecting locally and adhering to the law globally. They can compete on level terms in open nations such as the United States, but American firms cannot do the same in their nations. This gives foreign companies a subsidy.

Gaming of the global trading system cannot continue. President Trump is bringing symmetry back to global trade. Whether it increases or decreases foreign trade is up to America's trading partners. The can refuse to retaliate and work to roll back tariffs over time or they can escalate. The United States will not back down though, it is a politically untenable position because voters on left and right will throw out any politician who tries to return to an asymmetric trade position. Social mood will not allow it. These times call for great leaders, but those are in short supply.

Sell The Korean Talks

Whether this time is different, it's a sign the stock market and global economy are topping.

Not the DeDollarization You Expected

Cryptocurrencies are in the middle of a classic bubble phase, but take a moment to digest this anecdote:

The South Korean government is preparing to tax Bitcoin use after the cryptocurrency’s trading volume largely increased past the country’s stock exchange Kosdaq. Han Seung-hee, the commissioner of the country’s National Tax Service, told lawmakers this weekend that the issue of how to best tax cryptocurrencies is being discussed, including the areas of capital gains tax, the VAT, and gift tax, Bitcoin.com reported.

South Korea’s lawmakers held a National Tax Service (NTS) hearing in Sejong last week on October 13th. The NTS Commissioner Han Seung-hee answered several questions about the taxation of cryptocurrencies.

Seung-hee was asked, “as the daily transaction value of virtual money grows beyond the Kosdaq, we must actively cope with the shift away from the conventional reservations. What is the taxation plan?” Business Post reported.

Korea Times: Bitcoin trades top tech-heavy on KOSDAQ

Depression: Hanjin Goes Bankrupt

Reuters: Hanjin Shipping files for receivership, as ports turn away its vessels

South Korea's Hanjin Shipping Co Ltd (117930.KS) filed for court receivership on Wednesday after losing the support of its banks, setting the stage for its assets to be frozen as ports from China to Spain denied access to its vessels.

Banks led by state-run Korea Development Bank (KDB) withdrew backing for the world's seventh-largest container carrier on Tuesday, saying a funding plan by its parent group was inadequate to tackle debt that stood at 5.6 trillion won ($5 billion) at the end of 2015.

Hanjin Shipping, South Korea's biggest shipping firm, announced the filing for receivership and a request to the court to freeze its assets, which the Seoul Central District Court planned to grant, a judge told Reuters, declining to be named.

Tensions Rise in East China Sea

FP:In the East China Sea, Beijing’s Big Ships Push the Envelope

China has begun sailing bigger ships — old navy vessels nominally now serving as Coast Guard ones — near islands that Beijing and Tokyo both claim, as well as carrying out provocative flights with advanced jets overhead. Those aggressive tactics have alarmed Japan and raised the risk of a potentially violent incident between the two — and unlike in the South China Sea, where the United States has been vague about its readiness to help the Philippines in a dispute with Beijing, Washington has made clear it will honor its treaty obligations to come to Japan’s rescue.

The spat will be high on the agenda when President Barack Obama visits Tokyo this week, and Japan will be looking for the United States to repeat its reassurances that Washington stands by its mutual defense treaty commitments.

China’s bold tactics at sea, its growing military punch, and the nationalist rhetoric surrounding the feud in both countries arguably pose a more dangerous threat than the simmering disputes in the South China Sea. In Southeast Asia, Beijing is a heavyweight that wields overwhelming military and economic power compared with its smaller neighbors like the Philippines and Vietnam.

But in the East China Sea standoff, Japan, after decades of indifference and official pacifism, is flexing its military muscles and showing a determination to counter Beijing’s attempts to assert its territorial claims. Tokyo is investing record levels in its military, especially the navy, building up amphibious forces, bolstering missile defenses, buying stealthy F-35 fighter jets, and increasingly taking part in big military exercises with the United States and other countries. Next month, Japanese forces will join ships from the U.S. and Indian navies in a drill in the East China Sea.

CFR: Why Donald Trump's Plan for Japan Would Be a Nightmare for Asia

Should the US simultaneously end its longstanding alliances with both Japan and South Korea, as Trump has suggested, Northeast Asia would be transformed. Popular sentiments in both Japan and South Korea have become very sensitive to each other, and a potent cycle of reactive nationalism could result.

Seoul’s choices would feed into the Japanese debate. Seoul might see acquiring nuclear weapons as its only path forward for coping with a nuclear North Korea. Or it could seek greater accommodation with Beijing. A South Korea under the protection of China would strengthen Japanese calls for an autonomous military capability, including discussion of a nuclear option if Tokyo planners felt the Seoul-Beijing links were antagonistic to Japan.

Greater strategic cooperation between Beijing and Tokyo could also result, with a condominium of China, South Korea, and Japan emerging to challenge US interests in the Pacific.

Whether nuclear proliferation would result, or whether America’s non-nuclear allies would seek nuclear protection elsewhere, Asia’s geostrategic balance would undergo tremendous change.

The Diplomat: Donald Trump: A Reality Check for the US-Japan Alliance

Legally speaking, with the security legislation that has been enacted on April 1, Japan today can definitely do more, as long as the contingencies in question are considered to affect Japan’s survival, or security of its allies and important partners. But if there is one takeaway from the debate over Japan’s security legislation last year, it’s that the Japanese public is clearly more willing to support the government in its effort to harden its own defense, while they remain uncertain about Japan joining broader international coalition to tackle security concerns that are far from their borders, especially when there is no clear mandate by the United Nations. Despite the alliance managers’ aspiration for the U.S.-Japan alliance to be a global strategic partnership, this may point to a serious disconnect between what Japan’s policy elites envisions and what the public is willing to allow its government to do.

Korean Pop Stars Brought To Tears Over WWII History Flub

Pop group AOA has been blasted by the Korean public for failing to recognize a hero from WWII: AOA's Seolhyun, Jimin Controversy Continues Amid Comeback; History Professor Defends AOA Members

In the May 10 episode of the show, Seolhyun and Jimin were asked to match the photos and names of several important historical figures, which include Abraham Lincoln, Yi Sun Sin and many more.

However, the pair could not recognize Ahn Jung Geun, who is considered a hero and one of the most important Korean historical figures. He fought for Korean independence during the Japanese occupation and also became known for assassinating Japanese statesman and former Resident-General of Korea, Ito Hirobumi, reported Soompi.

Since then, Seolhyun and Jimin have received numerous criticism from Korean netizens, not only for not being able to recogniz Ahn Jung Geun, but also for allegedly calling him "Kinddokkang," which is apparently what he was called by the Japanese.

You can see the same mob mentality in any nation, but the target indicates potential future events. The East Asians are gearing up for international war with Japan, while the West is gearing up for civil war.