Markets
SPY5,248.32+0.35%
QQQ18,432.10+0.52%
BTC98,420+1.27%
ETH3,812-1.10%
NVDA952.30+1.36%
AAPL178.42-1.19%
TSLA168.90+2.62%
EUR/USD1.0892-0.21%
GC2,342.50+0.36%
CL82.15+1.17%
SOL178.50+3.36%
DXY104.82+0.14%
SPY5,248.32+0.35%
QQQ18,432.10+0.52%
BTC98,420+1.27%
ETH3,812-1.10%
NVDA952.30+1.36%
AAPL178.42-1.19%
TSLA168.90+2.62%
EUR/USD1.0892-0.21%
GC2,342.50+0.36%
CL82.15+1.17%
SOL178.50+3.36%
DXY104.82+0.14%
TF
tf/economics
312
tf/economics•Posted by u/macro_man••1 min read

Will Japan trigger the next global financial crisis?

Nobody's talking about Japan but it's the biggest ticking time bomb in global markets.

The facts:

  • Debt/GDP at 263% — by far the highest in the developed world
  • The BOJ holds 52% of all Japanese government bonds
  • The yen is at its lowest in 35 years
  • Japanese inflation is at 3.5% — higher than in Europe

The dilemma: if the BOJ raises rates to save the yen, the cost of debt explodes and Japanese banks (holding trillions in JGBs) take massive losses. If they do nothing, the yen keeps falling and imported inflation gets worse.

It's like Silicon Valley Bank but at a country scale. And Japan is the world's largest creditor — a disorderly unwind would propagate everywhere.

5 Comments

Connectez-vous pour laisser un commentaire

Sort by:
forex_sarah·edited

People have been saying Japan will blow up for 30 years. The "Japan trade" (shorting JGBs) has bankrupted more hedge funds than any other trade. They call it the "widow maker."

123
macro_manOP·edited

Historically true but the difference is that inflation is here now. Before, the BOJ could print with no consequences because there was no inflation. That luxury no longer exists.

67
options_queen·edited

If you want to hedge against the Japan scenario, what do you buy? Gold? Yen puts? CDS on Japanese debt?

56
newbie_investor·edited

How does Japanese demographics play into this? An aging and shrinking population fundamentally changes the fiscal equation, doesn't it?

45
macro_manOP·edited

Demographics is actually the most important factor. Fewer workers = fewer tax receipts = unsustainable debt over time. Japan loses 800,000 people per year. It's structural and irreversible.

38