Japan Spirals into Bankruptcy?

Discussion in 'Economics' started by observer67, Nov 4, 2009.

  1. TGregg

    TGregg

    Anybody have a link to Japanese age demographics? Most first world countries have aging populations due to low birth rates, but I do not know if Japan is one of them.
     
    #31     Mar 19, 2010
  2. #32     Mar 19, 2010
  3. Specterx

    Specterx

    Well, I'd say things have gone more or less exactly as predicted/feared since way back when. It's just that we tend to think these things are going to resolve themselves tomorrow, when in fact they operate on the scale of decades. But we're getting close. To a large extent, Japan was kept afloat (as was China et al) by the massive U.S. credit bubble that has now popped, and the same factors put off the day of reckoning for them.

    The savings rate in Japan is fast heading to zero on account of demographics and retirements; previously it's been quite high. It should actually hit zero and go negative in the next couple of years. I believe Japan also now has a trade deficit. At some point things are going to snap; they just can't keep financing these deficits indefinitely from domestic sources.

    And then, I recall a report a few months ago claiming that if the interest rate on JGBs went from 1.5% to 4%, the Japanese government would be bankrupt - debt service costs would exceed tax revenues. I suspect the Japanese are going to have some novel experiences not too far into the future.
     
    #33     Mar 19, 2010
  4. Specterx

    Specterx

    The Japanese population is actually shrinking due to low fertility. And, of course, it's aging, and Japanese folks tend to live an inconveniently (from a macroeconomics perspective) long time.
     
    #34     Mar 19, 2010
  5. m22au

    m22au

    I agree with Martinghoul's post (below), in that the Japan story is well known, but despite that the JPY has been strong since 1998.

    It's interesting to note that the Yen intervention yesterday was at roughly the level at which the currency peaked in 1995.

    Could yesterday's high in USD/JPY at about 82.90 be "the" high for the JPY for many years to come? Possibly.

    In the mean time, I enjoyed the following piece from Jim Quinn, "When Japan Collapses".

    http://theburningplatform.com/blog/2010/09/15/when-japan-collapses/

    ***

    More links to articles about the Japan situation:

    http://www.businessinsider.com/category/kyle-bass
    http://www.marketfolly.com/search/label/kyle bass
    http://www.absolutereturn-alpha.com...s-bet-the-bank-on-a-Keynesian-free-lunch.html
    http://ftalphaville.ft.com/blog/2009/11/05/81676/japan-einhorn-and-tontine-fantasies/

    More links to previous ET posts about the Japan situation:

    http://www.elitetrader.com/vb/showthread.php?s=&postid=2625327&highlight=kyle+bass+japan#post2625327

    http://www.elitetrader.com/vb/showthread.php?s=&postid=2607151&highlight=kyle+bass#post2607151

     
    #35     Sep 15, 2010
  6. Most of these hedge fund guys are all inflation traders. It's like they are all running around looking to start a fire by throwing out Molotov cocktails into a pharmacy.

    None of them can make money in a deflationary environment, because if they did, people would clue in on the simplicity of the trade - long USD, long treasuries. So instead they have to run around looking for an inflation trade or instigating one. I'll bet they are all hurting from their USD shorts, US Treasury shorts, and need a quick fix on an economy nobody can figure out, not even the Japanese.

    And with rates this low, you can imagine anyone with a couple of leveraged bucks to throw around it trying to bring out the flint and jury rig an inflation trade. This trade going on now in FXland has nothing to do with default of JGB. It has everything to do with exporting your deflation and its consequences.
     
    #36     Sep 16, 2010
  7. Once local funding of jpy debt is no longer possible due to an aging population retiring, rates will have to reach 3-4% (at least) since the jpy gov't will be forced to raise funds on the open market and therefore beforced to compete with the Treasuries and Bunds, etc. The current GDP/debt ratio should already add quite some risk premium (if demanded by the investor).
     
    #37     Sep 16, 2010
  8. m22au

    m22au

    Psytrade,

    What do you mean by "this trade going on now in FXland"?

    Also what do you mean by "trying to bring out the flint and jury rig an inflation trade"?

    Please note that I'm not attempting to set up conflict of any kind; I just don't understand what those two statements mean.


     
    #38     Sep 16, 2010
  9. #39     Sep 17, 2010
  10. emg

    emg

    well. the yen went up 15 yrs high. there is still tremedous value in japan
     
    #40     Sep 17, 2010