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Japan a bug that will not escape the windshield

Enjoying the good weather? Feelin’ groovy? Getting ready for summer? Like MarketingJapan, checking out great new places to eat? As Mike has clearly fumbled the ball on this one, I’ll have to pick it up (well somebody’s gotta!)

Summer may be cancelled. Japan is a bug in search of a windshield!!! Are you prepared? Are you preparing? Buying assets that will be of value in a recession? Got stocks of food and water? Got your cash under the mattress? No? Because you can always get your cash out from an ATM???

I quote from Mish’s Global Economic Trend Analysis.  And don’t think Mike is always out to yakitori: check out his hard-hitting piece on the Tokyo concert to end nuke power.

If Japan’s current-account was negative, Japan would depend on foreign capital to make up the deficit. Will foreigners fund Japan at 0% interest rates?

I think not.

Bug In Search of Window

Japan has debt-to-GDP ratio of 220% and rising. As of July 9, the Yield on 10-year Japanese Bonds is .80%.

A mere rise of 2 percentage points would consume all Japanese revenues just to pay interest on the national debt.

Moreover, Japan’s demographics are such that pension plans are now for the first time last year net sellers of bonds, not net buyers. For details, please see World’s Largest Pension Fund Needs to Sell Japanese Bonds; Japan’s Demographic Time Bomb Officially Goes Off

As John Mauldin commented in his book Endgame: The End of the Debt SuperCycle and How It Changes Everything, “Japan is like a bug in search of a window.” If you have not yet picked up a copy, please do so. It’s a good read.

Once Japan’s current account balance goes negative in a sustained way and I believe that will indeed happen, the bug will have found the window.

via Mish’s Global Economic Trend Analysis.

(I’ve changed Mish’s link to Mauldin’s book to direct you to the Amazon Japan product page; if you buy it from here, you’ll be buying me a drink. Cheers!)

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