The large amounts of wealth accumulated in the US has come from slave labor and the plentiful natural resources which are now almost depleted. Japan hasn't had either. The majority of the debt has come from idiotic public spending which will probably stop or at least slow down now. Japan won't go bankrupt, that's for sure.
Japan Spirals into Bankruptcy?
- Thread starter observer67
- Start date
One of the posters is suggesting that a carry trade unwind is still in effect from the May 6 flash crash era.
If this were true (and I think it is), it's possible that monetary policy gets subverted and it obviously creates these distortions in the yen (its risen because of the unwind of a global deleveraging process).
Obviously the Japs are pissed because unless you are a carry trade nation, you aren't effected. And whereas other countries think quantitative easing works to resurrect Markets (it doesn't), the presence of a carry trade is very dangerous.
So the desired policy effect by Japan is to introduce volatility into anyone planning on participating in the carry trade. I assume the ongoing effects of the carry trade are so pronounced that its like finding a squid in your mailbox when you check the mail to pick up a check.
As for people (Kyle Bass among others in Hedge Fund land) suggesting this is all directly tied into a relationship with the JGB and such, IMO it's not.
This will only get resolved by a period of macro shocks in Asia, and Japan should rethink its position in the world as an export nation.
If this were true (and I think it is), it's possible that monetary policy gets subverted and it obviously creates these distortions in the yen (its risen because of the unwind of a global deleveraging process).
Obviously the Japs are pissed because unless you are a carry trade nation, you aren't effected. And whereas other countries think quantitative easing works to resurrect Markets (it doesn't), the presence of a carry trade is very dangerous.
So the desired policy effect by Japan is to introduce volatility into anyone planning on participating in the carry trade. I assume the ongoing effects of the carry trade are so pronounced that its like finding a squid in your mailbox when you check the mail to pick up a check.
As for people (Kyle Bass among others in Hedge Fund land) suggesting this is all directly tied into a relationship with the JGB and such, IMO it's not.
This will only get resolved by a period of macro shocks in Asia, and Japan should rethink its position in the world as an export nation.
Maybe they can't go bankrupt but they can default on their bonds.
Why would they? Can't they just do what we do? Service the debt with newly printed money and if auctions don't sell, have the central bank purchase the treasury auction. What is the difference? Japan is a rich country, not in natural resources but they still manufacture a shit load of stuff that the world buys...
Interestingly, 40 years ago, japanese goods were considered shoddy cheap and shitty. Just like Chinese brands now,brands like Sony, Aiwa and Toyota were looked upon with disgust. Now you think they are the bee's knees.
Firstly, there isn't a CB out there that buys its govt's bonds in the primary mkt. Secondly, the BoJ has been buying JGBs (and other stuff) for 10yrs now, on and off. Thirdly, everyone knows that QE isn't the answer, not in the long term. The only solution is structural reforms that may fix the issues that the Japanese economy is mired in. Who knows when and how this will come about.
They WERE thought of as "quality" brands... until they started taking advantage of their name... to increase profit while cheapening their products.
I notice that despite a classic 'risk aversion' period in recent days (Europe sovereign debt concerns, European bank debt concerns, Korean fighting), that USD/JPY has:
(1) not fallen back towards and
(2) risen to levels last seen on 5 October, above 83.90
Now I could be wrong, and Japan could continue to finance itself for many more years. As such, I don't have a position in JPY as yet.
Also, if someone could post a chart of
* US-Japan 2 year yield spread (first Y axis) USD/JPY (second Y axis)
* US-Japan 10 year yield spread (first Y axis) versus USD/JPY (second Y axis)
I would be grateful.
(1) not fallen back towards and
(2) risen to levels last seen on 5 October, above 83.90
Now I could be wrong, and Japan could continue to finance itself for many more years. As such, I don't have a position in JPY as yet.
Also, if someone could post a chart of
* US-Japan 2 year yield spread (first Y axis) USD/JPY (second Y axis)
* US-Japan 10 year yield spread (first Y axis) versus USD/JPY (second Y axis)
I would be grateful.