Japan is rarely at the forefront of discussions about stimulus, national debt burdens and global economic recovery but, in financial markets, chatter about potential future weakness in the Japanese yen and Japanese government bonds is growing.
The rationale is ostensibly sound: a few weak JGB auctions are raising concerns about an upward spike in Japan’s net new borrowing requirement, precisely the opposite of what was promised during the election campaign. Throw in current yen levels making Japan’s economy extremely uncompetitive, the fact that Japan’s debt/GDP ratio is within a hair’s breadth of 200 per cent, a collapse in tax revenues and Japan’s rapidly ageing population laying bare the need for radical reform of its pensions and social security system, and Japan’s “goose” looks to be “cooked”.
