Japan Spirals into Bankruptcy?

Interesting to note that despite today being very much a "risk-off" day that USDJPY is up about 0.40% to 80.81.

In related news 10 year JGB +0.015% to 1.165% according to this delayed quote:
http://noir.bloomberg.com/apps/quote?ticker=GJGBBNCH:IND

and the 10-year T-bond down 0.108% to 2.99% as per this delayed quote:
http://noir.bloomberg.com/apps/quote?ticker=USGG10YR:IND

Also I note that the 10 year JGB yield bottomed in early May, whereas the USA T-Bond's yield continued to fall into June.

One day does not a trend make, however USDJPY is starting to form a solid base at 79.57 and 80.00. I'll probably revisit the Kyle Bass trade if and when the 10-year JGB goes over 1.35%
 
This crisis will depress the entire world. The US, EU and Japan are in horrible shape. Once the advanced economies take a tumble, all of the exporter/emerging countries will implode.

The next decade isn't looking so good....
 
Quote from clacy:

This crisis will depress the entire world. The US, EU and Japan are in horrible shape. Once the advanced economies take a tumble, all of the exporter/emerging countries will implode.

The next decade isn't looking so good....
More...

You'd love the children's story about "Chicken Little". Give you something to read in your spare time this summer.
 
Deflation will benefit western economies. There would be a catalyst to create jobs by repatriating manufacturing industries stolen by Asia and oil exporting countries would suffer also due to declining commodities prices.
 
 
Interesting to note that despite the prediction for many months / years, JGB 10-year yields are still at roughly 1%.

However Bass makes a good comparison with Italy - and how things have unraveled in that country in 2011.

He points out that due to the higher debt burden (measured in debt to GDP), Japan will face problems based on a smaller rise in bond yields.

I think he mentioned that the tipping point at which government revenues equals interest payments on debt (ignoring all other govt expenditure) is at a bond yield of about 3%.

This is obviously much lower than the levels at which PIIGS countries are in "bailout territory", being at roughly 7%.

As for how I'm playing the "Japan trade" - I'll happily wait for the 10-year to go above 1.35% or 1.50% and then sell the JPY against something (probably USD). As Martinghoul points out - the Japan situation could continue as is for many more years without bond yields rising dramatically.
 
I've seen quite a bit of talk on TV about how the recent increase in German 10 year yields resulted in 10 year Bunds (briefly) yielding more than UK 10 year Gilts.

A good comparison is the period from late October ("Greece is saved") to now.

http://www.bloomberg.com/apps/quote?ticker=USGG10YR:IND
US 10 year
late October
roughly 2.40%

down to 2.04% now

http://www.bloomberg.com/apps/quote?ticker=GUKG10:IND
UK 10 year
late October
roughly 2.60%

down to 2.37% now

http://www.bloomberg.com/apps/quote?ticker=GDBR10:IND
German 10 year
late October 2.20%

up to 2.33% now

http://www.bloomberg.com/apps/quote?ticker=GJGBBNCH:IND
Japan 10 year
late October 1.05%

up slightly to 1.06% now

So while "safe" US and UK bonds have seen yield declines, 10 year JGB yields are roughly flat in the same period.

Not enough evidence for me to start shorting JPY as yet, but possibly maybe possibly maybe a sign that JGB yields will not fall much below 1% in the months and years to come.
 
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