Monday, June 10, 2013

Video: Japan's Debt Problem Visualized, When Will Japan's Interest Expense Rise Above Its Tax Revenue?


Source: Addogram on Youtube

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)

Related news and research:

  • 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)
  • Japan current account surplus doubles as income gains, exports rise (Reuters, 6/9/2013)

You can track Japan's break-even inflation rate here.

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