But the question is when will JGB rates spike and what will be the official catalyst if "Abenomics" fails to spark inflation. If the catalyst ends up being supply/demand for JGBs because of Japan's deteriorating savings pool and lack of foreign investment, will the Bank of Japan just support the entire JGB market until there is a currency crisis (loss of faith in the central bank)?
Here is a chart of the JGB 5-year yield via Bloomberg.com. Look how the 5-year JGB yield and Japan's expected inflation rate (breakeven rate) pulled back recently. Is this simply just a correction?
|1-year chart of the 5-year JGB Yield (source: Bloomberg.com)|
|5 year chart of the 5-year JGB Yield (source: Bloomberg.com)|
- Japan's Ruling LDP Party Joins JGBi Market In Fears that "Abenomics Could Fail" (Zero Hedge, 6/9/2013 w/ chart of the breakeven inflation rate turning down)
- Richard Koo: "Honeymoon For Abenomics Is Over" (Zero Hedge, 6/9/2013)
- Japan current account surplus doubles as income gains, exports rise (Reuters, 6/9/2013)
- Japan needs to cut corporate tax: Japan PM Abe aide (Reuters, 6/72013)
- Richard Koo Warns Of "Beginning Of The End" For Japanese Economy (Zero Hedge, 5/23/2013)
You can track Japan's break-even inflation rate here.