Japan Spirals into Bankruptcy?

Japan needs immigration- huge influx of young people exported from china and India to increase domestic consumption and contribute to economic growth.

Germany also needs immigration.
 
I am well aware that lots of people have been burnt by shorting JPY too early, based on the well documented story about Japan's woes.

Specifically:

* huge about of debt outstanding
* secular change in population dynamics (Japanese savings rate declining and then projected to go negative)
* interest rates needing to rise to encourage "investors" from outside Japan to buy JGBs
* but given the high amount of outstanding debt, the interest expense would increase significantly

However I note the following:

* Rounded bottom in USD/JPY from November 2010 to now.

* USD/JPY made a higher low in early January, and another higher low in early February.

* A few hours ago, USD/JPY broke out to levels not seen since December, whereas EUR and GBP were stronger against USD.

* JPY has been weaker against CHF in recent months, with CHF acting as more of a safe haven than JPY.

* USD/JPY has been trading in a similar pattern to AUD/USD in recent months, with a chart pattern similar to that of the Emerging Markets ETF (EEM).

* Although AUD/USD has a similar topping pattern, AUD has been stronger than JPY in recent weeks.

So I initiated a small position long USD/JPY on the break above 83.68 (high of 7 January and 11 February) this morning.

If Dylan Grice and Kyle Bass are correct, then USD/JPY could go to (insert big number here above 100) if Japan prints a lot of "money" to get out of its debt situation.

I might look to add to the position if and when the 10 year JGB goes above 1.40% and beyond, which would suggest that marginal "investors" are demanding higher yields for the money-printing risk.

Bloomberg chart for 10 year JGB
http://noir.bloomberg.com/apps/cbuilder?ticker1=GJGBBNCH:IND
 
Japan will be fine. they will always be in the top 5 largest economy in the world due to excellent education system, one of the most innovation country
 
Quote from emg:

Japan will be fine. they will always be in the top 5 largest economy in the world due to excellent education system, one of the most innovation country
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They face a world of hurt.

Much has been made of the Baby Boomers here in the States. While it is true that this generation is significantly larger than the previous one, the following generations are approximately the same size. We do not have a bubble in population across age as many might suspect. Japan OTOH, has a real bubble - this generation that is retiring is much larger than the previous one, and the next one is much smaller.

To make matters better for the past but worse for the future, most of their national debt is held inside the country. Essentially, they owe most of their money to themselves. But most of that debt is earmarked for retirement support of a huge, aging population.

It's going to be interesting to see what happens as Japan attempts to roll that debt from its own citizens onto the rest of the world.

I'm not saying to short JPY, or that trouble is here. Nobody really knows how all this debt is going to play out around the world. Perhaps more importantly, nobody knows when trouble will start. If I had to guess many years ago, I would have said Japan would have already had massive pain by now. I mean, look at the numbers - they are completely boxed into a corner. There's no escape. WTF would anybody loan them any money without a huge premium for risk? But I guess it's only money to many.
 
Very good timing regarding my post on Japan above.

Today ZeroHedge published the following letter from Kyle Bass, where he provides a brief overview of the Japan endgame thesis.

http://www.zerohedge.com/article/kyle-bass-latest-must-read-letter-cognitive-dissonance-it-all

The main thing that gave me confidence to enter the trade today was that in addition to weakness against the USD, the JPY has been weak against both currencies perceived as "risk-on" (EUR, GBP and to a lesser extent AUD) and also "risk-off" (CHF).
 
Quote from TGregg:

There's no escape. WTF would anybody loan them any money without a huge premium for risk? But I guess it's only money to many.
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That is why gold is going up!!! gold will continue to go up!!
 
Quote from m22au:

Very good timing regarding my post on Japan above.

Today ZeroHedge published the following letter from Kyle Bass, where he provides a brief overview of the Japan endgame thesis.

http://www.zerohedge.com/article/kyle-bass-latest-must-read-letter-cognitive-dissonance-it-all

The main thing that gave me confidence to enter the trade today was that in addition to weakness against the USD, the JPY has been weak against both currencies perceived as "risk-on" (EUR, GBP and to a lesser extent AUD) and also "risk-off" (CHF).
More...

Japan wants to lower their super high currency to boost their economy. They were trying to lower their yen for the past 20 yrs and the yen is finally going down. that will help japan raise their interest rate.

I think that by increasing debt will lower the yen instead of cutting the interest to 0%
 
Kyle Bass was on CNBC "Strategy Session" earlier today.

Article:
http://www.fundmymutualfund.com/2011/02/video-kyle-bass-heads-to-cnbcs-strategy.html

Video 1 (10 minutes):
http://plus.cnbc.com/rssvideosearch/action/player/id/3000005603/code/cnbcplayershare
"Stocks are being lifted by a slew of new M&A deals, and a look at why Japan might be closer to a global default and a necessary restructuring than anyone thinks, with Kyle Bass, Hayman Capital Partners managing partner"

Video 2 (8 minutes):
http://plus.cnbc.com/rssvideosearch/action/player/id/3000006155/code/cnbcplayershare
"Discussing zero interest rate policy as an inescapable trap, and the reasons why Europe is currently caught in the throes of a true credit crisis, with Kyle Bass, Hayman Capital Partners managing partner"
 
 
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