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Japan Spirals into Bankruptcy?
- Thread starter observer67
- Start date
Quote from ralph00:
I don't think there's a more universally hated market on the planet that pretty much every gov't bond market. Look for bonds to outperform many asset classes in 2010.
Another possibility is that short-term government debt rallies strongly towards 0%, while longer-term bonds don't move much up or down.
This is a pretty good paper on the subject from the IMF. I'd classify it as "guardedly pessimistic".
http://www.imf.org/external/pubs/ft/wp/2010/wp1019.pdf
http://www.imf.org/external/pubs/ft/wp/2010/wp1019.pdf
Today, Standard & Poor's announced that it has lowered the outlook on Japan's debt from stable to negative, in response to uncertainty regarding glacial growth and looming deficits in Japan.
While the debt rating has not been officially lowered, all signs indicate that it will drop from its current rating of AA at some point in the future unless substantial progress is made. Japan's increasingly inflexible economic policy, however, may make such necessary progress unlikely.
Downgrading Japan's debt rating will make it more expensive for Japan to borrow, which will devalue the yen. This situation is a troubling echo of the problems experienced in Portugal and Greece, which Moody's has labelled "troubling".
http://www.benzinga.com/general/99946/s-p-lowers-outlook-on-japan-s-debt-rating
While the debt rating has not been officially lowered, all signs indicate that it will drop from its current rating of AA at some point in the future unless substantial progress is made. Japan's increasingly inflexible economic policy, however, may make such necessary progress unlikely.
Downgrading Japan's debt rating will make it more expensive for Japan to borrow, which will devalue the yen. This situation is a troubling echo of the problems experienced in Portugal and Greece, which Moody's has labelled "troubling".
http://www.benzinga.com/general/99946/s-p-lowers-outlook-on-japan-s-debt-rating
Quote from ralph00:
I don't think there's a more universally hated market on the planet that pretty much every gov't bond market. Look for bonds to outperform many asset classes in 2010.
Hated??? Lol. Yeah right. Everyone loves government bonds so insanely much right now that they're willing to bid treasuries down to negative yields. The 30-year chart of treasuries looks like a bubble of epic proportions. America is bankrupt, and sooner or later, pension funds are going to resemble that state of bankruptcy as well when they take massive losses on their long-term bond portfolios.
And why would anyone believe the bond rating agencies?? They're so full of sh*t, they didn't even see the housing bubble coming.
Japan Heading for Currency Crisis
Japan leads developed economies with regard to government debt-to-GDP ratios, coming in at 167.6%, followed by the U.S. at 70.2%, the euro-zone at 69.3% and, bringing up the rear, the UK at 51.7%. So, Japan, as of 2008, already had a much higher government debt-to-GDP ratio than the U.S. is projected to have in the 10 years ended 2019. Talk about scary stuff!
Japan has experienced a high national saving rate, in part because of a high household saving rate (see Chart 3). Japan's high national saving rate is reflected by its current account surpluses in the past 25 years (see Chart 4). In effect, the Japanese have saved so much that they not only have been financing their own government deficits but exporting financial capital to other economies to help finance their government deficits, too.
But will Japan be able to keep financing its own government deficits internally? As shown in Chart 5, the Japanese population is declining. One of the reasons the Japanese population is declining is that it is aging rapidly. As more and more Japanese retire, the household saving rate will decline further as Japanese seniors deplete their accumulated financial capital to live on. Although a lot is written in reference to the government debt problems the U.S. is about to incur and how the U.S. dollar will depreciate as a result, very little seems to be written, in the U.S. press, at least, about the looming debt problem faced by Japan.
With respect to the U.S., although the federal government has stepped up its rate of dissaving, households have stepped up their rate of saving. From 1999 through 2006, U.S. households were consistently net demanders of funds. That is, their net acquisitions of financial assets were consistently less than their net accumulation of debt (see Chart 6). Starting in 2007, U.S. households once again conformed to the post-war norm by becoming net suppliers of funds. In the first three quarters of 2009, U.S. household purchases of U.S. Treasury debt outstripped foreign purchases of U.S. debt, including foreign official purchases (see Chart 7).
In sum, if you want to worry about government debt problems in the developed economies, I suggest you start with Japan. Its current government debt-to-GDP ratio is considerably higher than what is projected for the U.S. Japan's household saving rate is declining while the that of the U.S. has started to climb again. If you were a middle-aged Chinese or Indian investor, where would you rather place some of your funds? In Japan, with its declining population, entrepreneurial-sapping government regulation and cultural bias against individualism? Or in the U.S., with its still growing population and a culture of entrepreneurship? If there is going to be a government debt-induced currency crisis in the next 10 years in a developed economy, my money is on the yen, not the dollar.
http://www.marketoracle.co.uk/Article16758.html
Japan leads developed economies with regard to government debt-to-GDP ratios, coming in at 167.6%, followed by the U.S. at 70.2%, the euro-zone at 69.3% and, bringing up the rear, the UK at 51.7%. So, Japan, as of 2008, already had a much higher government debt-to-GDP ratio than the U.S. is projected to have in the 10 years ended 2019. Talk about scary stuff!
Japan has experienced a high national saving rate, in part because of a high household saving rate (see Chart 3). Japan's high national saving rate is reflected by its current account surpluses in the past 25 years (see Chart 4). In effect, the Japanese have saved so much that they not only have been financing their own government deficits but exporting financial capital to other economies to help finance their government deficits, too.
But will Japan be able to keep financing its own government deficits internally? As shown in Chart 5, the Japanese population is declining. One of the reasons the Japanese population is declining is that it is aging rapidly. As more and more Japanese retire, the household saving rate will decline further as Japanese seniors deplete their accumulated financial capital to live on. Although a lot is written in reference to the government debt problems the U.S. is about to incur and how the U.S. dollar will depreciate as a result, very little seems to be written, in the U.S. press, at least, about the looming debt problem faced by Japan.
With respect to the U.S., although the federal government has stepped up its rate of dissaving, households have stepped up their rate of saving. From 1999 through 2006, U.S. households were consistently net demanders of funds. That is, their net acquisitions of financial assets were consistently less than their net accumulation of debt (see Chart 6). Starting in 2007, U.S. households once again conformed to the post-war norm by becoming net suppliers of funds. In the first three quarters of 2009, U.S. household purchases of U.S. Treasury debt outstripped foreign purchases of U.S. debt, including foreign official purchases (see Chart 7).
In sum, if you want to worry about government debt problems in the developed economies, I suggest you start with Japan. Its current government debt-to-GDP ratio is considerably higher than what is projected for the U.S. Japan's household saving rate is declining while the that of the U.S. has started to climb again. If you were a middle-aged Chinese or Indian investor, where would you rather place some of your funds? In Japan, with its declining population, entrepreneurial-sapping government regulation and cultural bias against individualism? Or in the U.S., with its still growing population and a culture of entrepreneurship? If there is going to be a government debt-induced currency crisis in the next 10 years in a developed economy, my money is on the yen, not the dollar.
http://www.marketoracle.co.uk/Article16758.html
JGB yield curve steepens as big buyers' faith dented
http://www.reuters.com/article/idUSTRE62I0UM20100319
(Reuters) - Japan's yield curve is at its steepest in a decade and could rise further as core local investors, worried about mounting supply, are in no hurry to buy and may demand higher premiums for longer-dated government debt.
more at http://www.reuters.com/article/idUSTRE62I0UM20100319
http://www.reuters.com/article/idUSTRE62I0UM20100319
(Reuters) - Japan's yield curve is at its steepest in a decade and could rise further as core local investors, worried about mounting supply, are in no hurry to buy and may demand higher premiums for longer-dated government debt.
more at http://www.reuters.com/article/idUSTRE62I0UM20100319