I am not saying that. Wait to see what happens after the repatriation process is complete, which means the yen stays strong until then. After that, we go back to money flowing to the strong and risk-worthy economies.
Japan is drifting helplessly towards a dramatic fiscal crisis. For 20 years the world's second-largest economy has been able to borrow cheaply from a captive bond market, feeding its addiction to Keynesian deficit spending – and allowing it to push public debt beyond the point of no return. The rocketing cost of insuring against the bankruptcy of the Japanese state is telling us that the model has smashed into the buffers. Credit default swaps (CDS) on five-year Japanese debt have risen from 35 to 63 basis points since early September. Regime-change in Tokyo and the arrival of Yukio Hatoyama's neophyte Democrats – raising $550bn (£333bn) to help fund their blitz on welfare and the "new social policy" – have concentrated the minds of investors at long last. "Markets are worried that Japan is going to hit a brick wall: the sums are gargantuan," said Albert Edwards, a Japan-veteran at Société Générale. Yukio Hatoyama (pictured left), the new Japanese prime minister, has several large challenges to tackle ... Simon Johnson, former chief economist of the International Monetary Fund (IMF), told the US Congress last week that the debt path was out of control and raised "a real risk that Japan could end up in a major default". The IMF expects Japan's gross public debt to reach 218% of gross domestic product (GDP) this year, 227% next year, and 246% by 2014. This has been manageable so far only because Japanese savers have been willing – or coerced – into lending for almost nothing. The yield on 10-year government bonds has been around 1.30% this year, though they jumped to 1.42% last week. – Telegraph
Japan is drifting helplessly towards a dramatic fiscal crisis. For 20 years the world's second-largest economy has been able to borrow cheaply from a captive bond market, feeding its addiction to Keynesian deficit spending – and allowing it to push public debt beyond the point of no return.
Ignored
Japan is not the only G7 country with such problems. The US is in a much bigger mess and don't forget the New Orleans disaster. Anyhow, Japan is a net exporter and US owes Japan nearly $1 trillion (Japan was the single largest buyer of US Treasuries until an year ago).
Guess what will happen to the USD if this US Treasury deposits are liquidated by the Japanese holders?
Japan is not a resource rich country and a lot of it has to be imported to re-build the damages inflicted by this natural disaster. A stronger Yen, which will make the imports cheaper, therefore beneficial for the Japanese economy in the short-medium term. Obviously, it will make their exports dearer too but the likes of Toyota's drop in overseas demand will be replaced by stronger domestic demand.
I am not saying that. Wait to see what happens after the repatriation process is complete, which means the yen stays strong until then. After that, we go back to money flowing to the strong and risk-worthy economies.
Keep in mind there is trading relations between United states and Japan, so always consider this. Japan is one of the biggest buyers of US debt. It's possible Japan would sell some US treasury holdings to pay the reconstructions after the disaster.
Joined Sep 2006
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Status: Oh yeahhh :)
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"The Bank of Japan has also decided to pump 15 trillion yen ($183bn USD) into the markets to improve financial stability in the short term. This should increase the yields on Japanese debt, attracting investment. A similar policy was put in place after the Kobe earthquake in ‘95 and 3 months later USDJPY had lost near 20% to sit at an all-time low. While we are not suggesting that a similar move is likely in the coming 3 months, a strengthening of the yen has to be watched for."
Now when they grapple with a possibility of a nuclear meltdown the situation is really devastating. Nikkei 225 SA has already closed 6.2 percent down...
The costs of the crisis are likely to mean a further painful increase in the Japanese government's debt, which already stands at 200% of GDP - that's bad news...
