This is wrong of course. You're of course going to ask for examples, so I'll give you my response now: consult the Internet using Google.
Japan Spirals into Bankruptcy?
- Thread starter observer67
- Start date
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You maybe right Mart...; NOT that Japan is as dumb as Detroit socialists They were NOT to bright @ Peal Harbor, but they dont hold grudges.They make good USA-Japanese cars. Stupid Smoot -Hawley tariff may not hurt US-Jap autos made here??
Olivier Blanchard eyes ugly 'end game' for Japan on debt spiral
Japan is heading for a full-blown solvency crisis as the country runs out of local investors and may ultimately be forced to inflate away its debt in a desperate end-game, one of the world’s most influential economists has warned.
Olivier Blanchard, former chief economist at the International Monetary Fund, said zero interest rates have disguised the underlying danger posed by Japan’s public debt, likely to reach 250pc of GDP this year and spiralling upwards on an unsustainable trajectory.
http://www.telegraph.co.uk/business...-eyes-ugly-end-game-for-japan-on-debt-spiral/
Japan is heading for a full-blown solvency crisis as the country runs out of local investors and may ultimately be forced to inflate away its debt in a desperate end-game, one of the world’s most influential economists has warned.
Olivier Blanchard, former chief economist at the International Monetary Fund, said zero interest rates have disguised the underlying danger posed by Japan’s public debt, likely to reach 250pc of GDP this year and spiralling upwards on an unsustainable trajectory.
http://www.telegraph.co.uk/business...-eyes-ugly-end-game-for-japan-on-debt-spiral/
More likely they will slowly decline (as they have been for years) until they reach a tipping point. Once that tipping point is reached things can (and probably will) collapse virtually overnight. As Martinghoul has repeatedly pointed out lots of very smart and talented traders have lost money trying to predict that point. The problem with making that prediction accurately is that no one knows exactly what set of conditions is likely to trigger the run and, if you wait for the run to begin, you need to move on the dime. That said, I would rather move after it starts than try to predict; if Julian Robertson can't predict it I'm not going to try.
NIRP is promoted to cause increased lending and spending.
But in Japan, it's causing technical problems in swap spreads that in turn inhibit lending, which the swap spreads are used to hedge.
And when lending is inhibited it results in slower money growth, and perhaps that's one reason the yen strengthened.
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• Negative Swap Rates Impede Kuroda’s Push To Boost Japan Lending (BBG)
Negative rates for swapping interest payments are hindering the ability of corporate borrowers to hedge their liabilities – another way in which the Bank of Japan’s unorthodox attempt to revive lending could backfire. The fixed rate paid in exchange for floating-rate payments for a year in Japan’s interest rate swap market fell below zero after the BOJ started charging banks for reserves in February, and was at minus 0.049% on Thursday. Floating-rate loans in Japan aren’t allowed to have repayment rates below zero, causing a disconnect with traditional hedging methods. “Interest-rate swaps aren’t functioning properly” as hedging tools, said Satoshi Oda at Credit Agricole in Tokyo. “Without swaps, banks will have trouble making floating-rate loans and will need to extend fixed-rate loans, but most banks don’t like lending at fixed rates, so they’re becoming hesitant about making new loans.”
Lending growth in Japan excluding trusts slowed to 2% in March from a year earlier, the weakest pace in three years, according to BOJ data released Tuesday. Sumitomo Mitsui Trust Bank sees a drop in swap-market activity as companies avoid using the contracts amid uncertainty about whether regulators will allow floating-rate repayments below zero. When companies take out such loans, they often enter into a derivative deal to hedge, agreeing to pay the fixed swap rate in return for a floating-rate payment that protects them if borrowing costs rise. However, while loan deals stipulate that repayment rates won’t be negative, depriving companies of that benefit, swap transactions do allow for negative payments, meaning the hedger could wind up exposed to risks in both the swap and loan market.
But in Japan, it's causing technical problems in swap spreads that in turn inhibit lending, which the swap spreads are used to hedge.
And when lending is inhibited it results in slower money growth, and perhaps that's one reason the yen strengthened.
=======================
• Negative Swap Rates Impede Kuroda’s Push To Boost Japan Lending (BBG)
Negative rates for swapping interest payments are hindering the ability of corporate borrowers to hedge their liabilities – another way in which the Bank of Japan’s unorthodox attempt to revive lending could backfire. The fixed rate paid in exchange for floating-rate payments for a year in Japan’s interest rate swap market fell below zero after the BOJ started charging banks for reserves in February, and was at minus 0.049% on Thursday. Floating-rate loans in Japan aren’t allowed to have repayment rates below zero, causing a disconnect with traditional hedging methods. “Interest-rate swaps aren’t functioning properly” as hedging tools, said Satoshi Oda at Credit Agricole in Tokyo. “Without swaps, banks will have trouble making floating-rate loans and will need to extend fixed-rate loans, but most banks don’t like lending at fixed rates, so they’re becoming hesitant about making new loans.”
Lending growth in Japan excluding trusts slowed to 2% in March from a year earlier, the weakest pace in three years, according to BOJ data released Tuesday. Sumitomo Mitsui Trust Bank sees a drop in swap-market activity as companies avoid using the contracts amid uncertainty about whether regulators will allow floating-rate repayments below zero. When companies take out such loans, they often enter into a derivative deal to hedge, agreeing to pay the fixed swap rate in return for a floating-rate payment that protects them if borrowing costs rise. However, while loan deals stipulate that repayment rates won’t be negative, depriving companies of that benefit, swap transactions do allow for negative payments, meaning the hedger could wind up exposed to risks in both the swap and loan market.