Japan: Bubble prophet fears new disaster


it was from bloomberg

for anyone that doesnt know Noda is their current finance minister - one of many in the last 4 years

mobile.bloomberg.com/news/2012-0 … %2Fasia%2F


Japan posts first annual trade deficit since 1980 -> finance.yahoo.com/news/japan-pos … 35981.html


Japanese FM seeks closer diplomatic ties with China - -> news.xinhuanet.com/english/china … 375868.htm


95% of Japanese Government Debt is domestically held.
The household savings rate is high.
Household assets are predominately held in deposits in the banks (unlike US and UK where share ownership is much higher).
Contrary to the image of Mrs Watanabe beloved of the investment analysts, most household savings are invested domestically in the banks.
The banks in turn buy Government Debt.
This recycling of domestic savings into domestic government debt is unlikely to change soon. Think of the pinsters who have the German bank accounts, who can the Japanese trust to hold their yen savings, but themselves. S&P can cut the rating but it will have very little impact.

Noda is prime minister since last year (he used be finance minister)
He was doing a bit of sabre rattling with the 3% comment to try to get tax increases through.


That’s the old model, the paradigm has shifted.


Boy Racer,… Ambrose Evans Pritchard
Euro Basher par excellence and writes for Daily Torygraph, ffs link to something informative.

I suggest you look up OECD statistics liabrary if you want to get some raw figures without the journalistic bias thrown in.

Household wealth and indebtness
oecd-ilibrary.org/economics/ … 4x-table18

Of the seven former G7 countries listed in the table, Japan has the highest net financial assets at 375% (as a percentage of nominal disposable income)
Only 35 out of 375 are in equities.
Note that a lot of non financial asset wealth is in the form of property, so focusing on net financial assets gives the best view of true hard cash wealth.

Savings rates, circa 6-7% according to OECD
oecd-ilibrary.org/economics/ … 84x-table7


Yeah, and the Irish savings rate was 12%… yet dometic deposits were declining…

The savings rate is a largely meaningless statistic.


Domestic deposits declining in Ireland but in Japan?
Again I ask the question where will Japanese households be able to safely invest their savings in yen denominated assets apart from into domestic deposit accounts in their own banks.

Don’t forget they practically closed their country to the outside world for 250 years, so culturally they are highly unlikely to pile their savings into EUR, USD or Ambrose Evans Pritchard’s favourite: Sterling


I thought savings included anything that wasn’t being spent in the economy, including paying down debt. So it’s not necessarily going into deposits, but that doesn’t make it a meaningless statistic.


Yes. It is not ‘savings’, it is also repayment of past debts and interest on those debts. That’s why I say it is ‘largely’ meaningless…


Household debt in Japan has significantly delevereged since early 90s and is now back at OECD G7 average level (less than US or UK)
Look at the OECD net asset tables which show household financial liabilities including a sub-category for mortgages.
oecd-ilibrary.org/economics/ … 4x-table18

Where the Japanese are significantly ahead of the OECD is in net financial assets, a significant portion of which is held in bank, post office deposits and insurance company policies which invest in fixed income securities.

So to answer to the original question asked; ‘how can the japanese goverment continue to borrow at 1%?’
Households have accumulated significant savings which are deposited in the domestic banks and post office savings accounts and in insurance company saving products.
These institutions need to back their liabilities (customers yen denominated savings) with yen denominated assets, hence they purchase large quantities of domestic Govt debt.

The Japan Post Office Holds 25% of household savings and 20% of government debt.

Bash away!


Surely that makes it tremendously important and interesting. If somebody had shouted loudly enough about the upward spiralling debt in the bubble years, we might have averted disaster. If we note the reducing debt levels now, we might avoid a negativity-inspired contraction. (Ok, it’s a long shot :smiley:)


The problem is that the deleveraging has to happen once you have a massive debt buildup. The quicker that happens for those who can afford it, the better - otherwise you end up in a japanese situation of stagnation. So the savings rate having been so low, it now has to be high.

The problem with this is that politicians and professional chancers say “look at the savings rate, there’s a wall of money being salted away”. It’s not really true. There’s a wall of debt that has come due and is being reduced to a fence. Once that happens, it will be possible to return to a more normal level of imported consumption :sick:


is the savings rate a 6-7% of disposable income rather than gdp
as i understand it younger japanese were more free with the purse strings before the crash and its was down to ~3%
obviously gone up since 2008

japan seems a wreck but it will take time to crash
the working age population has remained steady over the last 20 years
the change has occured between the u16 and elderly
once the working age population continues its decrease over the next 20 years the sh1t will hit the fan and its is likely to unravel in a 1-2 year period


Japan surprises market with extra £82bn stimulus -> telegraph.co.uk/finance/fina … mulus.html


Is Japan next ?

Japan’s debt levels have ballooned to a level that makes Greece look like a steward of capital. Wall Street has noticed, and it’s placing its bets.


The final paragraph is a pointer to when Japan’s finances eventually come to a head - i.e. when the domestic lenders become net sellers.
This is actually a double-edged sword, as the increase in retirees will not only reduce domestic demand for JGB’s, but the demographic shift towards an (even) older population means that everyday domestic demand (for goods and services) will further decrease.

Personally, I believe Japan is the world’s largest debt pressure cooker.
When it explodes, there’s going to be an almighty mess.


Kyle Bass, 14 minutes in on Japan.


Get rid of money-wasting foundations, ‘amakudari’ before hiking taxes -> japantoday.com/category/kuch … king-taxes


worse than greece

zerohedge.com/news/japans-sh … rse-greece


The Yen’s Looming Day of Reckoning - Andy Xie -> english.caixin.com/2012-03-23/100372177_all.html