Selling Japan's Debt

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Includes: EWJ, FXY, TBT, TLT
by: Matthew Green
A few news stories about Japan caught my eye late last week. Obviously, most of us are familiar with the fact that the Japanese government is trying anything and everything to maintain their 200% Debt/GDP ratio. What some may not be familiar with is the increasingly desperate tactics the Japanese government is using to market their debt.
According to Bloomberg, a new marketing campaign is taking a page from colognes, high-end liquor and other such goods in appealing to 25-40 year old males to buy government debt. A few direct translations from a print ad: A 27-year old woman says, “I want my future husband to be diligent about money.” And more directly, “Men who hold JGB’s are popular with women.”

The practice of selling JGB’s via subway and taxi ads is nothing new, and neither is the use of models/actresses to market government debt. What’s new is this new, colorful marketing campaign and its intended audience. Not surprisingly, it comes at a time when Japanese households and retirees have begun to reduce their holdings of government debt.
One can only imagine what the knee-jerk reaction could be when US households, retirees in particular, begin to do the same with their respective government debt. Angelina Jolie could begin to appear in on billboards and/or public service announcements, not about adopting children from unfortunate third-world circumstances, but rather extolling the virtues of US debt and financing the deficit. While Uncle Sam would be proud of the effort, one can only hope the outcome would be as successful as his war bond drives have been throughout history.
While the preceding story was ominous, unusually truthful comments last week from the new Japanese Prime Minister were even more worrying. PM Naoto Kan came as close as any official from the Japan has to acknowledging the problem outright according to the BBC.
What is most worrying is the fact that such advertising campaigns, as mentioned above, will have to be ramped up in the coming years. In particular they will target the older generations in hopes of to maintaining their holdings through retirement. The US Treasury should be keeping a close eye on this effort to see whether it works, as the baby boomers will likely be doing the same thing in coming years, all the faster if confidence in treasuries begins to erode.
Of course, through all this news the Yen isn’t budging. Keep an eye on this, to say the least.

Disclosure: No Positions