When Japan's debt bubble bursts - watch ou

[Russell]

Investors are understandably scared of the sovereign debt crisis unfolding in Europe, but they are ignoring a more definite and significantly larger sovereign debt catastrophe that is about to hit the world's third-largest economy: Japan. The prelude to Japan's current crisis began in the early 1990s when its housing and stock market bubbles popped, leading to recession. Today, 20 years into endless stimuli, the Japanese economy is beset by the same rot it was then, except that its debt has tripled - the ratio of debt to gross domestic product (GDP) stands at almost 200 percent, double those of the United States and Germany, and second only to Zimbabwe.

(csmonitor.com)
http://www.csmonitor.com/Commentary/Opinion/2010/0812/When-Japan-s-debt-bubble-bursts-watch-out

[Taka-Okami]

If I were all you loser bottom feeding Gaijin who work in translation or eikaiwa, I'd be planning an exit strategy from the land of the setting sun.

[Iraira]

If I were all you loser bottom feeding Gaijin who work in translation or eikaiwa, I'd be planning an exit strategy from the land of the setting sun.

Any hints on a good solid career to enter before it all melts down, Jack?

[Taka-Okami]

I'd say medicine would be the best. There will always be a need for doctors. I'm in engineering, so I'm definately not immune. I fully expect to be out of work within the next 2 years as GFC2 bites hard.

[maraboutslim]

When little countries owe money to big countries, and big country decides to get pissed, little country is in a heap of trouble. When the USA or Japan or Europe owe money to themselves and/or the Chinese who totally depend on a healthy customer base to survive themselves, then what's the problem?

It's all just lines on a spreadsheet somewhere and doesn't have any real meaning. And last I checked, all those who manage the spreadsheets could care less, in Japan's case, because the Yen is at a damn near all time high against the dollar.

[FG Lurker]

When little countries owe money to big countries, and big country decides to get pissed, little country is in a heap of trouble. When the USA or Japan or Europe owe money to themselves and/or the Chinese who totally depend on a healthy customer base to survive themselves, then what's the problem?

Did you read the article, or just immediately dismiss it? It poses some good questions. What happens when Japan's saving rate turns negative (it's already close to zero) and Japan can no longer sell enough new bonds domestically? Who will buy Japan's debt when even now the US and Germany offer higher interest rates than Japan? Japan can't afford to raise interest rates as already 1/4 of tax revenue goes to cover existing debt interest. Japan can't default and has far too much debt to be bailed out a-la Greece. That leaves cranking up the printing presses. Japan also holds about $700bil in US debt, it's hard to imagine Japan not dumping that debt (and not buying any more of it) when domestically the shit starts to hit the fan. How will a sudden dumping of $700bil in US Treasuries affect the US?

I don't know where all this is leading but the article paints one scenario and it is a frightening one for sure.

It's all just lines on a spreadsheet somewhere and doesn't have any real meaning. And last I checked, all those who manage the spreadsheets could care less, in Japan's case, because the Yen is at a damn near all time high against the dollar.

Fundamentals always win in the end. For whatever reason the market is ignoring all the problems in Japan and focusing only on problems in the US, EU, and UK. When Japan's problems finally get noticed the FX markets could make very rapid corrective moves.

[Samurai_Jerk]

Fundamentals always win in the end. For whatever reason the market is ignoring all the problems in Japan and focusing only on problems in the US, EU, and UK.

That's what I've found most interesting about endaka this time around. It almost seems like there's some kind of conspiracy between Soros and his cronies to manipulate the markets in favor of a strong yen. Maybe it's China trying to fuck Japan into a severe crash so they can buy it out

[Russell]

Originally Posted by FG Lurker
What happens when Japan's saving rate turns negative (it's already close to zero) and Japan can no longer sell enough new bonds domestically? Who will buy Japan's debt when even now the US and Germany offer higher interest rates than Japan? Japan can't afford to raise interest rates as already 1/4 of tax revenue goes to cover existing debt interest. Japan can't default and has far too much debt to be bailed out a-la Greece. That leaves cranking up the printing presses. Japan also holds about $700bil in US debt, it's hard to imagine Japan not dumping that debt (and not buying any more of it) when domestically the shit starts to hit the fan. How will a sudden dumping of $700bil in US Treasuries affect the US?

Recently China started to buy J-debt, and this may be the beginning of an important trend for China to become less dependent on the US bonds. That may be a short-term solution to Japan, but it will certainly make many Japanese uncomfortable. If some J-politicians are smart, they will use this as an argument to make the populace finally understand the importance of the debt issue. Many Japanese don't seem to understand the problem with the J-debt: they tend to look at me rather sheepishly when I tell them, even young people, for whom this should be an extremely serious issue.

Originally Posted by FG Lurker
Fundamentals always win in the end. For whatever reason the market is ignoring all the problems in Japan and focusing only on problems in the US, EU, and UK. When Japan's problems finally get noticed the FX markets could make very rapid corrective moves.

I very much agree with you that fundamentals win in the end, but I just have problems to see what issues determine the fundamentals. My educated guess is there are two:

1. Yen becoming stronger because of a positive trade balance (as long as it lasts)

2. Yen becoming weaker because of the need to monetize the debt, i.e., to let the printing presses run. This has not started yet, because the Bank of Japan outright refuses this course of action. However, it remains to be seen how long they can resist pressure from politics.

Based on these fundamentals I think for the short to medium term there is a low risk that the Yen will suddenly spiral down. One BIG positive is that the J-government debt is issued in Yen, not in foreign currencies. A slight Yen weakening of, say, up to 25% may occur, though, when the world's perception of Japan's situation relative to the US and EU changes.

In the long term everything is possible, especially when the presses start to run. Since increases in taxes appear politically impossible, this may be a likely outcome. Even worse, the J-government may be forced to borrow in foreign currencies...

Finally, there is the Yen carry trade, which has significantly diminished in the last years as the interest rates in the US and EU start to approach those in Japan. So, in some sense, the Yen-Dollar exchange rate has returned to its fundamentally correct value, that is, the value it should have, absent Yen carry trade. Apart from the bad influence on the Yen exchange rate, there is also a good influence of the decrease in Yen carry trade. Those Yens loaned out for economic expansion in other countries will now be invested in Japan, be it in government bonds or in the private sector. So, it is not all negative...

[Buraku]

The Banking Collapse of 2023 is now bigger than the 2008 “banking crisis”

https://www.investmentwatchblog.com/the ... -2008-was/