So the BOJ think they will exit its QQE (easing) program? - If anyone can tell me who is going to buy Japanese govt debt at 60bp then please let me know. So then if the world demands yields closer to other OECD nations (say 2.5%) this will cripple Japan. Why on earth would you lend funds to the Japanese government for a 0.6% expected return over 10 years? When they shell out about 21% of govt revenue on the interest on its current debt (with yields at 60bp), then payments on interest when yields are at 2.5% should be closer to 90%!. How does this end well for the BoJ? How do they exit bond buying? I am struggling to work it out - (VIEW LINK)
Comments
Chris Weston
sell JPY...of course that depends on what happens...worst case would be a debt write off, but this very low probability..all seems some way off, but they need to get debt down and that is a major task...while they do this they need to work out how to keep yields low..gold i'm sure will do well
Jordan Eliseo
yeah gold in JPY has done fine of late - but short term its not looking great (in USD at least). The problem for the BOJ and Abe only compounded by the fact most of the debt is held internally and they're demographics are so bad. If the BOJ steps away from market and domestic pension funds need to sell, how does it not implode? You get the feeling a few decades from now financial history books will have a chapter focused specifically on Japan!
Jordan Eliseo
Hi Mate - something Dylan Grice wrote about a few years ago when at SocGen - the end game is pretty easy to predict - Default on a epic scale - just a question of its an honest default (ie telling Mr and Mrs Watanabe that their assets ie loans to the government) are worth a lot less than 'market value', or continued debt monetization. Entire Western world headed down this path. Question is how to protect (let alone profit) from whats about to unfold.