Is Japan About to Collapse Economically?

[Bien Pensant]

Biggest Treasury Buyer Outside U.S. Quietly Offloads Billions

(Bloomberg) - In times of Treasury turmoil, the biggest investor outside American soil has historically lent a helping hand. Not this time round.

Here's Glenn Beck's take on it (I've heard of the bloke but never seen anything of his before, seems pretty lucid although Encyclopedia Langlica says he's a "conspiracy theorist" but how else can you understand current affairs these days ) - essentially, he thinks Japan is going to collapse which will drag the US down with it:

 

For reference:

12 Countries with the highest Debt-to-GDP ratios:

Venezuela — 350%

Japan — 266%

Sudan — 259%

Greece — 206%

Lebanon — 172%

Cabo Verde — 157%

Italy — 156%

Libya — 155%

Portugal — 134%

Singapore — 131%

Bahrain — 128%

United States — 128%

See https://tradingeconomics.com/country-list/government-debt-to-gdp

[THEFREEMAN]

Hope so

[Phil]

1 hour ago, THEFREEMAN said:

Hope so

That$33b to zelensky would be a vey slow drip. Probably for the best imo.

[blobloblob]

Stunned that we're not in the top 12.

[Sugarlips]

If it does, it’s because it never allowed itself to unwind and heal from the last boom which blew up a staggering 32 years ago, perfect example of markets staying irrational longer than we can stay solvent.

[Axeman123]

The last 12 or more years have been about every developed country turning Japanese. If Japan reaches the end of the road, it is a very significant turning point IMO. 

[Frank Hovis]

I don't see any particular reason why it would go now.

More than public debt it's private debt that usually triggers a financial crisis.

 

 

And that's very similar to our own.

Private Debt to GDP in Japan is expected to reach 222.00 percent by the end of 2021, according to Trading Economics global macro models and analysts expectations. In the long-term, the Japan Private Debt to GDP is projected to trend around 225.00 percent in 2022 and 227.00 percent in 2023, according to our econometric models.

https://tradingeconomics.com/japan/private-debt-to-gdp#forecast

Private Debt to GDP in the United Kingdom is expected to reach 215.00 percent by the end of 2022, according to Trading Economics global macro models and analysts expectations. In the long-term, the United Kingdom Private Debt to GDP is projected to trend around 211.00 percent in 2023 and 212.00 percent in 2024, according to our econometric models.

https://tradingeconomics.com/united-kingdom/private-debt-to-gdp#forecast

 

[Joncrete Cungle]

2 hours ago, blobloblob said:

Stunned that we're not in the top 12.

Depends how the numbers are crunched. Add in all the unfunded, underfunded, off balance sheet smoke and mirrors hidden liabilities....

Off the top of my head all the Quango costs, borrowing and pension liabilities don't count in the official figures. Because its 'none governmental'

[Long time lurking]

The BOJ have just surpassed the 50% threshold regarding holding Japans bonds 

On 02/05/2022 at 10:40, Joncrete Cungle said:

Depends how the numbers are crunched. Add in all the unfunded, underfunded, off balance sheet smoke and mirrors hidden liabilities....

Off the top of my head all the Quango costs, borrowing and pension liabilities don't count in the official figures. Because its 'none governmental'

I don`t think public sector pension liability are in there as well 

[sancho panza]

1 hour ago, Long time lurking said:

The BOJ have just surpassed the 50% threshold regarding holding Japans bonds 

I don`t think public sector pension liability are in there as well 

It's even worse,from 7 april 22

https://www.bloomberg.com/news/articles/2022-04-07/a-430-billion-habit-got-japan-s-central-bank-hooked-on-etfs

Such wide-ranging goals have led the Japanese central bank to amass a whopping 80% of the country’s ETFs—equivalent to about 7% of its $6 trillion stock market—in less than a decade. That’s far further than any other central bank in the world has gone in trying to prime its economy via equities purchases. The Bank of Japan has also outpaced peers with its $3.7 trillion in net bond purchases.

But nine years and few hundred billions of dollars worth of ETF purchases later, the most striking consequence of the world’s boldest monetary experiment is this: The BOJ is stuck with a vast portfolio it might not be able to get rid of.

Share Haul

BOJ's pile of stock funds makes up 5% of its $6.1 trillion holdings

 

 

 

[jamtomorrow]

7 hours ago, sancho panza said:

have led the Japanese central bank to amass a whopping 80% of the country’s ETFs

Sweet Jesus - that is an absolutely toxic setup. It's as if BoJ have been slowly treading (over the course of decades) the path that Terra/Luna followed beginning to end in a handful of years.

To try and summarize that path in a nutshell: it's ultimately the liquidity itself that is volatile - it condenses miraculously out of thin air on the way up, but flashes off to vapour just as miraculously on the way down.

I already posted this (which got me thinking about the parallels) on one of the gold threads, but I think worth re-posting here: 

 

 

[sancho panza]

6 hours ago, jamtomorrow said:

Sweet Jesus - that is an absolutely toxic setup. It's as if BoJ have been slowly treading (over the course of decades) the path that Terra/Luna followed beginning to end in a handful of years.

To try and summarize that path in a nutshell: it's ultimately the liquidity itself that is volatile - it condenses miraculously out of thin air on the way up, but flashes off to vapour just as miraculously on the way down.

I already posted this (which got me thinking about the parallels) on one of the gold threads, but I think worth re-posting here: 

 

 

I think that's an excellent perspective.

Japan was the first into the deflationary hole some 30 years ago and in pursuit of the dream of 2% inflation and the supposed stability that comes with it,they've sacrificed stability on a much longer term basis than they ever realsied.

I think some Japanese companies will do very well witha weaker yen becaus I suspect that's what they'll get.

The issues with transparency are myriad and something teh main thread is one of teh few corners of teh web where they get a decent airing alongside the likes of wolf richter,shaun richards etc.

I mean who'd have thought Shaun Richards decade long attempts to try and bring seemingly boring issues like inflation measurements to the MSM would finally bear fruit.

Short story long,I think the bulk of the West has had it's day telling teh world how to live.And these sorts of thing you highlight are the structural reaosns behind it.

[sancho panza]

https://www.japantimes.co.jp/news/2022/06/30/business/economy-business/factory-output-drop-may/

Japan’s factory output posted the biggest monthly drop in two years in May as China’s COVID-19 lockdowns and semiconductor and other parts shortages hit manufacturers, adding more pressure on an economy struggling to mount a strong recovery.

Factory output slumped a seasonally adjusted 7.2% in May from the previous month, official data showed on Thursday, as production of items such as cars as well as electrical and general-purpose machinery dropped sharply.

The decline, which marked the sharpest monthly reduction since a 10.5% month-on-month drop in May 2020, was much bigger than a 0.3% fall expected by economists in a Reuters poll.

[sancho panza]

we're going japanee today but reading shaun richards he's on the moeny as ever.

https://notayesmanseconomics.wordpress.com/2022/07/01/the-ecb-and-bank-of-japan-are-winning-for-now-in-the-bond-market-lottery/#comments

Bank of Japan

Back on the 17th of June we looked at the way that the Bank of Japan was continuing its policy of Yield Curve Control where it will not let Japanese Government  Bond ten-year go past 0.25%. There has been a clear side-effect which has been a fall in the value of the Yen which nudged 137 versus the US Dollar earlier this week.

However the Bank of Japan gritted its teeth at the time and pressed on.

Deutsche Bank estimates that the BoJ has spent $72bn buying bonds just this week, almost what Fed and ECB were doing in an entire month last year. Adjusted for the different sizes of their respective economies, the pace of Japanese QE this week is more than 20 times the pace of the Fed’s in 2021. ( FT Alphaville)

Comment

The strategic move here has been the realisation that the economic  outlook is not only grim but that it has already arrived. This has pulled bond yields lower and has been the strategic move. It means that life has been made easier in a tactical sense for the Bank of Japan too. The babarians at the gate from its point of view have been easier to resist. Some will have sold Japanese bonds and bought elsewhere continuing the game.

If we switch to the ECB it has also benefited from the bond market rally with the ten-year yield of Italy at 3.35% rather than the over 4% it was. Although it is awkward as it means it is buying the bonds more expensively ( something central bankers always gloss over). But there are two further moral hazard problems.

1. The ECB will build up a balance sheet of bonds that nobody else wants
2. If you only buy the bonds of the weaker more indebted nations then you encourage others to become more indebted. You also weaken the stronger nations.

 

[Axeman123]

I know people have been calling the end of Japan for years, but surely if the interventions needed are accelerating it is just a matter of time. 20x the pace of EU QE seems like it could be closer to weeks than years IMO.

[tank]

Most people forget that Japan is an insular country that has almost no immigration.

Economists in the globalist, neoliberal 'West' have been predicting their demise for decades due to their 'ageing' population and previously 'unorthodox' monetary policies, yet here they are still knocking about as one of the world's biggest and most productive economies.

They wouldn't even dream of importing a million third worlders a year to fudge GDP like we do. Instead, they have high tech industries that export and a large domestic economy that caters to a culturally and racially homogenous population.

They view themselves as a cut apart from the 'West' and rightly so. I wouldn't write them off.

[Axeman123]

3 hours ago, tank said:

Most people forget that Japan is an insular country that has almost no immigration.

Economists in the globalist, neoliberal 'West' have been predicting their demise for decades due to their 'ageing' population and previously 'unorthodox' monetary policies, yet here they are still knocking about as one of the world's biggest and most productive economies.

They wouldn't even dream of importing a million third worlders a year to fudge GDP like we do. Instead, they have high tech industries that export and a large domestic economy that caters to a culturally and racially homogenous population.

They view themselves as a cut apart from the 'West' and rightly so. I wouldn't write them off.

All well and good; but if their unorthodox policy is dependant upon the state buying stocks and bonds and they already own most of them, what happens when they run out of them to buy? I admit I never would have guessed things could run this far, but surely there is a limit? Why would anyone take yen if the bonds are all owned by the government? Surely the only end game is them ending up a Chinese protectorate, by BRI rather than military means.

[Bien Pensant]

Japan becomes a low wage economy - "Software developers 30% cheaper than in Vietnam"

'The depreciation of Yen-denominated wages has made the country an attractive alternative, especially with China in crisis'.