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Is US entering Japan's nightmare?

That's a good point, because as I understand it, most of J-bonds are held by domestic entities, whereas US T-bonds are mostly held by foreign entities. I think that is not insignificant.
 
Yields on benchmark government's 10-years bonds .... in selected countries
MPR709_c49gif-1.jpg


Japan: Nearly 1% only ..... meaning enough J-bond purchaser in Japan. But other countries' yields are gradually up.... meaning insufficent purchaser in those countries. Of course, in other words, there are not so many risk-assets in Japan for investors to spend.... But for ordinary people, Lower yield of J-bonds means Lower house loan rate.
 
Of course, Japan has its problems. Its average age is rising steadily and its population is shrinking. One in five Japanese is over 65. The Democrats have promised to raise pensions and payments to parents – and to cut taxes. It is hard to see how the sums add up. While the US and the UK worry that their public-sector debts could hit 80 per cent of gross domestic product, Japan's debt is heading for 200 per cent.

Some of its efforts to deal with an ageing society are positively unnerving. The country has led the world in developing robots as companions for the elderly. These include a "snuggling Ifbot" that, according to press reports, "lives in an astronaut suit, chats about the weather, sings and plays games".

It is best not to laugh. As the US and Europe struggle to come to terms with the aftermath of a bubble economy, rising public debt and the retirement of the baby-boom generation, they should look to Japan with respect. It may be the future.
Subscribe to read | Financial Times

FT may have been realizing ... what happened in Japan shows up in USA, UK and others.
But the point is it's too late.
 
Yields on benchmark government's 10-years bonds .... in selected countries
MPR709_c49gif-1.jpg

Japan: Nearly 1% only ..... meaning enough J-bond purchaser in Japan. But other countries' yields are gradually up.... meaning insufficent purchaser in those countries. Of course, in other words, there are not so many risk-assets in Japan for investors to spend.... But for ordinary people, Lower yield of J-bonds means Lower house loan rate.

While the interest rate on the national debt may be low, 1% x 1.7 GDP per annum is a huge amount of money that must be covered by the national budget. (Japan doesn't wiley niley print money to pay it off.) If inflation kicks in and the interest rate rises, we're in for a very bad time. So I don't think the debt should be taken lightly.
 
J-Governement Bond Going Big in Japan, but Yield on 10-Year Bond is Going Down.

MIAX933A_JGBHE_NS_20090724194818gif-1.jpg


This arguably makes Japan's massive debt load more manageable. After all, the debt is kept mostly within the extended family. That is in contrast to the U.S., which has to persuade foreign investors regularly to step up and purchase huge amounts of bonds. Doing so is riskier for foreign investors than domestic ones, not least because of the currency risk it entails. Foreign ownership of Japanese government bonds stood at 6.4% at the end of March, down from 7.9% six months earlier. In the U.S., about half of Treasurys are owned by foreign investors.

It is interesting to see Anglo-American rator such as Moody's and S&P downgrading J-bond do not afftet J-bonds' 10-Year Yield AT ALL.
I think ... This is why Life in Japan is easy, while others are NOT.
 
While the interest rate on the national debt may be low, 1% x 1.7 GDP per annum is a huge amount of money that must be covered by the national budget. (Japan doesn't wiley niley print money to pay it off.) If inflation kicks in and the interest rate rises, we're in for a very bad time. So I don't think the debt should be taken lightly.

I advise you NOT to use "national debt", but correct is "Government Debt" as owner of J-bonds are almost all Japanese. As I said, government debt is equal to Japanese citizen's "Asset".

Inflation ? .... Japan is a country of Deflation for the past 10 years or more, and still being deflation. Infaltion is already dead in Japan a long time ago.
 
I advise you NOT to use "national debt", but correct is "Government Debt" as owner of J-bonds are almost all Japanese. As I said, government debt is equal to Japanese citizen's "Asset".
Inflation ? .... Japan is a country of Deflation for the past 10 years or more, and still being deflation. Infaltion is already dead in Japan a long time ago.

Alright, government debt. However, my point is that servicing this government debt even at 1% a year is a tremendous burden on taxpayers. It's over 7 trillion yen per year (for now) that must be paid out of the budget. Do you know what I could do with 7 trillion yen a year? Besides having a good time in Roppongi, something a lot more productive than what it's being used for now. So this debt is a big drag on the economy and needs to be scaled back. Besides, you can't depend on deflation lasting forever.

I'm gonna have to talk to Mr. Hatoyama about this. We'll blame the LDP :p
 
Alright, government debt. However, my point is that servicing this government debt even at 1% a year is a tremendous burden on taxpayers. It's over 7 trillion yen per year (for now) that must be paid out of the budget. Do you know what I could do with 7 trillion yen a year? Besides having a good time in Roppongi, something a lot more productive than what it's being used for now. So this debt is a big drag on the economy and needs to be scaled back. Besides, you can't depend on deflation lasting forever.
I'm gonna have to talk to Mr. Hatoyama about this. We'll blame the LDP :p

I think .... you miss TWO IMPORTANT POINTS.

1. Japan is a sovereign nation, not a private company nor regional government like California, meaning J-government is able to print Japanese YEN note. If Japan print USD note, then it is called CRIME. But Japanese government is free to print YEN note. And it is doing so, but we don't see ANY sign of Inflation.

2. I would like to ask you ..... ARE there Any country to repay government debts from its Budget/tax in our human being history ???

All government bonds, including US-T bonds, are continuously repaid BY ROLL-OVER only. And Japan is a sovereign nation.... meaning ... unlike us, it has a permanent LIFE. So keep Roll-Over FOREVER is enough. No need to repay.

The point is ... as far as government can continue ROLL-OVER forever, Debt is Nothing.🙂

Of course, it is possible only in the case of JAPAN in this PLANET as J-government can get finance in JPY within Japan at CHEAP cost. or Am I wrong ?
 
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About Half of UST-bonds onwership is foreigner ..... This is NATIONAL DEBT.

And the largest share of UST-bond ownership is now ... Chinese, while Japan has successfully/secretly reduced the share for the past years.

Chinese are NOT US citizen, and unlike Japanese, they are quite demanding. They will NOT be quiet when the value of USD is deteriorated as they will suffer from such a devalution. China may demand USA to cede US Land, such as Hawaii, Alaska or California.....

This is a reality and future of USA, I think. Therefore, instead of worrying about J-bonds, I suggest USA, UK and others to worry about themselves.
 
Okay, let's not get carried away here. I'm gonna have to keep paying Japanese taxes for a little while longer so I'm a bit concerned. Anyway, it's an interesting discussion, and you brought up the matter.

For the sake of discussion, let's assume you are right.

Then, the government is monopolizing a huge portion of household savings for unproductive purpose indefinitely. Isn't that a waste? Shouldn't some or more of that asset be used by the private sector for economic growth?

As for printing money to pay the interest on the debt, why stop at just the interest portion? Why not monetize some of that debt, especially now when the yen is getting stronger and deflation is the immediate problem. How about monetizing about 2 or 3% of the debt per year until inflation becomes a problem. If done this way, the government won't have to talk about doubling the consumption tax. (Why didn't the LDP think of this?)

As for the U.S. debt, the problem is enormous. I think a painful adjustment is on it's way, but no ceding of territory. It can be settled in gold as I suggested in another post or some other method. But, I'm glad I live in Japan. :)
 
Then, the government is monopolizing a huge portion of household savings for unproductive purpose indefinitely. Isn't that a waste? Shouldn't some or more of that asset be used by the private sector for economic growth?
As for printing money to pay the interest on the debt, why stop at just the interest portion? Why not monetize some of that debt, especially now when the yen is getting stronger and deflation is the immediate problem. How about monetizing about 2 or 3% of the debt per year until inflation becomes a problem. If done this way, the government won't have to talk about doubling the consumption tax. (Why didn't the LDP think of this?)

I think ....

Japan is ageing and poluation is shrinking, meaning market size will not be expanded. Thus, private sector is reluctant for spending (or investment) in Japan. But they are investing in China, India, and other emerging markets as, if we invest there, returns on investment will be more than that in Japan. In other words, Japanese Banks are geting cash deposits from individuals, but they cannot find good customers for lending even at very low interest rate. Good companies like Toyota say "We don't need money from banks as we have enough cash on ourselves". Those Japanese banks are therefore purchasing J-bonds, lending money to J-government.

So, question is not either Wasteful investment in public sector or not, but market demand on cash is originally not storng anymore in Japan. In other words, we have money more than enough and the money continues to pile up.

But such a situation occurs in other advanced nations.... Typically EU. Europeans continued to succeed avoiding market maturzation... by establishing EU and introduction of Euro... and mostly importantly "property bubble".

Bubble is a kind of "fake" demand for money. Until bubble bust, private sector is very active and borrowing money from banks. During that time, governements do not need to spend money as private sector spends money.

And after bubble burst, as only hope for economy is government spending (also export, but export is not realistic), everybody focuses on domestic market by spending in public sector, meaning more government bonds.

My answer is .... there is no WAY-OUT, except government spending, and there are ultra-sufficient money in Japan, and thus J-government can get finance within Japan at cheap cost, and as far as it continues roll-over, it is government debt but at the same time it is our asset. Though the interest rate is very small, we still enjoy certain yield, and it is much better in deflationary economy.

But it is only possible in Japan, not in USA and EU. .... because Japanese economy is well structured to get money from overseas .... namely returns on investment. As I said before in other threads, Japan's surplus of income balance is HUGE, much more than trade surplus. It is becasue J-companies continued to invest in overseas (not Gambling).

Japan is approaching Utopia. I think. But J-government tries to hide such a secret because if it is known by US economists, US government will tell us "Hey Japan, Give us money!" 🙂
 
I see. ☝

Hmmm, that makes some sense, I think. But what happens when the global economy really recovers, and local investors can get better returns by investing elsewhere - for example the emerging economies. In fact, with the strong yen, I'd rather buy Australian bonds than J-bonds right now. Don't you think the government may have problems trying to roll-over the debt in the not so distant future.
 
Don't you think the government may have problems trying to roll-over the debt in the not so distant future.

I don't know, but having a look at nature of Japanese, SAVING is always more than SPENDING, while others are opposite. That's one point.

Second point is .... income surplus from overseas is more chronicle than trade surplus, while Japan is ageing and shrinking, meaning that excess money supply must also be chronic in Japan. This means that Japanese banks will face more difficulty for lending money in Japan.
J-government must become borrowers, otherwide WHo borrow the money in Japan.

After all, there is always more money in Japan than demand. I think .... it's chronic.

Then Americans may say "Please purchase US T-bonds as we can offer you better yield", ... but from Japanese perspective, US T-bond is risker as JPY is always going up. Of course, IF US goverment can issue T-bond in Japanese YEN, we are willing to purchase "Samurai Bond", but US government doesn't like that as they will take higher yen risk.

After all, JPY will continue to stay in Japan, and thus excess supply of JPY in Japan, and thus always LOW Yield, and then J-government will continue to spend our money on behalf of us within Japan because unless somebody spend money, eocnomy (GDP) does not expand.

I think .... Japanese economy aleady goes beyond conventional economics. And this is our problem.
 
I'd rather buy Australian bonds than J-bonds right now.

Maybe good idea as Aussie bonds give us more yield than J-bonds, but I think it must be issued in AUD.

Then Can you predict exchange rate of AUD/JPY over next years ? Aussie Bond Yields will disappear immediately if JPY go up against AUD, and history tells such odds are more probable.
 
My belief is that the AUD/JPY exchange rate will be favorable to Japanese investors because its low now but will strengthen with the global economic recovery, because Australia is rich in natural resources that the world economy needs. So Japanese investors could make make money through both fx translation and interest rates differential.

I would qualify this by limiting purchases to 5 year bonds or lesss because the incremental returns for 10 year bonds are not worth the extra risk. But I'm not George Soros so you have to take this with a grain of salt. (All investors must take my suggestion at their own risk.)
 
IMF suggests earlier recovery; U.S. stocks rise
TOPWRAP 3-IMF suggests earlier recovery; U.S. stocks rise

The most importrant Japanese Lesson:

After bubble burst, stock market may often show "Up or Recovery", and people think "we are seeing the end of tunnel", but Crisis will not end as far as financial companies' BAD Loan problems are NOT solved, and Solving BAD Loan problemes take More Years as those financial companies usually continue to hide bad loans. And We call it "Balance Sheet Recession"
 
Japan is approaching Utopia. I think. But J-government tries to hide such a secret because if it is known by US economists, US government will tell us "Hey Japan, Give us money!"
I am not sure how you define "utopia" as it is hard to imagine the Japanese domestic economy is faring any better than other industrialized countries. Maybe the Japanese corporate and industrial complexes (one of the three pillars of Japan's power structures, the others being politicians and career bureaucrats) are making money from overseas investments while the middle class Japanese nationals have started experiencing the lower standard of living.

Investments incomes are out in public (the fact you have pulled that stat from some sources proves they are the public information). I highly doubt the US govt is that stupid.

Still, the J govt's debt load is rapidly approaching 200% of Japan's GDP, which is a scary number. If Japan is a communist country, then, dividing the debt load among its citizen is an easy way to sort out the massive govt debts. But, Japan being a semi capitalist country with a fair dose of socialism mixed in, once the time comes to face that debt load, I am not sure if the Japanese collectively sing "this is our (my) debt" and hand out their hard earned money to the govt without experiencing personal financial hardship.
 
IMF suggests earlier recovery; U.S. stocks rise
TOPWRAP 3-IMF suggests earlier recovery; U.S. stocks rise
The most importrant Japanese Lesson:
After bubble burst, stock market may often show "Up or Recovery", and people think "we are seeing the end of tunnel", but Crisis will not end as far as financial companies' BAD Loan problems are NOT solved, and Solving BAD Loan problemes take More Years as those financial companies usually continue to hide bad loans. And We call it "Balance Sheet Recession"
That's true Japan took close to 2 decades to clean up the bad loans. In the current recession, many large (and small, for that matter) financial entities still carry hard-to-assess complex financial instruments and derivatives. Those financial chop shops have cooked up so many questionable asset classes that no one can really tell definitively how much bad assets / loans they have on their books.

Another massive bailout financed by tax payers will certainly elicit a vehement public outcry, which will lead to political instability. It is no surprise that the US govt does not want to prod the American banking institutions to pick the lower estimate on what they have on their books. That will certainly force the US govt to unleash another bailout to prop up the American financial industry as a whole, in the face of public protest against such a corporate welfare program.
 
I am not sure if the Japanese collectively sing "this is our (my) debt" and hand out their hard earned money to the govt without experiencing personal financial hardship.


PLease imagine:

Somebody are living next to my house.
Astroboy is lending money to his wife, and his wife borrows 200% of annual house income from Astroboy (husband). But neighbors are telling "Astroboy's family is going bankrupt"..... Is this legitimate ?

IF Astroboy's wife is borrowing money from Banks or neighbors, then it's Astroboy family's DEBT, and which must be repaid, but we are lending and borrowing money within our house ! Plus such lending money is being printed by inhouse Canon Laser Printer on Astroboy's desk .... 🙂

I would like to ask you "What is your problem with our inhouse borrwing & lending ?"
 
PLease imagine:
Somebody are living next to my house.
Astroboy is lending money to his wife, and his wife borrows 200% of annual house income from Astroboy (husband). But neighbors are telling "Astroboy's family is going bankrupt"..... Is this legitimate ?
IF Astroboy's wife is borrowing money from Banks or neighbors, then it's Astroboy family's DEBT, and which must be repaid, but we are lending and borrowing money within our house ! Plus such lending money is being printed by inhouse Canon Laser Printer on Astroboy's desk .... 🙂
I would like to ask you "What is your problem with our inhouse borrwing & lending ?"
Your analogy does not illustrate this matter at all (or, to put it bluntly, there is no relevance here at all). Japan's populace (or any other nationals who have individual freedom) does not consider their neighbors as their own relatives and will not lend money freely to total strangers. From your comment, you sound like you will gladly pay whatever higher taxes the government levy, without any protest.
 
The mass media has been predicting the downfall of Japan for years. However, despite the bad years following the collapse of the bubble era, Japanese society has remained remarkably stable and the economy has stubbornly remained in the no. 2 position in the world. So Japan must be doing something rigtht that people who only read newspapers can't understand. Newspaper journalist have to write about something and picking on Japan seems to be a sure way to generate interest, if not real thought. So paraphrasing newspaper/magazine aritcles is not a very smart thing to do.
 
The mass media has been predicting the downfall of Japan for years. However, despite the bad years following the collapse of the bubble era, Japanese society has remained remarkably stable and the economy has stubbornly remained in the no. 2 position in the world. So Japan must be doing something rigtht that people who only read newspapers can't understand. Newspaper journalist have to write about something and picking on Japan seems to be a sure way to generate interest, if not real thought. So paraphrasing newspaper/magazine aritcles is not a very smart thing to do.
Well, a country does not collapse overnight or in a matter of a few years. Usually, it takes a slow gradual decline over the course of decades before it reaches a point of no return. At that point, a new normal will be set (I am not sure what kind of normal it would be). I don't think there is something good Japan did; rather, it dithered along postponing the decisions (like any other democratic countries do).

Japan's #2 position in the GDP ranking would only last a few more years before China overtakes Japan. Once that happens, it would certainly affect Japan's standing in Asia from the economic and geopolitical perspectives. Other vibrant countries will zip past Japan if Japan stays pat.
 
You're just repeating the same old, same old. You don't really have a good grasp of economics.
 
After all, all in the world, including Japanese economists, misunderstand Japanese economy.

It cannot be helped .... as Anglo-American rators such as Moody's, S&P and Fitch, etc. used to downgrade J-bonds to the level of Botswana or similars. Probably those rators used their own rating model, which are based on Anglo-American economic models.

However, as you know, those rating did NOT affrect J-bond's yileds AT ALL, but remained the lowest among the world even today. Those rators must have lost their credibility at least in Japan. In fact, many of my friends had laughed at them because it was obvious that Japnese economy cannot be measured by those conventional economic models.

Plus, as we don't trust those Anglo-American rators, we didn't trust AAA grade's subprime mortgages, either.
 
The difference between a country's external financial assets and liabilities is the net international investment position. A country's international investment position (IIP) is a financial statement setting out the value and composition of that country's external financial assets and liabilities. International Investment Position = domestically owned foreign assets - foreign owned domestic assets.
Net international investment position - Wikipedia

And US position is:



Contorary Japan position is:

Japan's net asset position amounted to 250.2 trillion yen at year-end 2007 -- a new record high for
the second consecutive year -- as a result of an increase of 35.1 trillion yen or 16.3 percent from
the previous year-end (215.1 trillion yen).
http://www.boj.or.jp/en/type/ronbun/ron/research07/data/ron0808a.pdf
And as far as I know, Japan is the largest creditor in the world.

How possible does the world's largest creditor go collapse?

Instead of worrying about Japan's inhouse lending & borrowing, I suggest IMF/World Bank (controlled by USA) to worry about USA.
 
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