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About That Quadrillion Yen Problem (Japanese Debt Revisited)

|Includes: EWJ, SPDR Gold Trust ETF (GLD)

Seems I'm not the only one worried about the Japanese debt. Time to revisit the topic after I wrote about it in the context of gold prices in terms of fiat money. Here are some even more alarming quotes from a former Soros advisor...

The International Monetary Fund estimates Japan's debt will grow to 245 percent of GDP this year. The nation will spend 22.2 trillion yen servicing its debt in the fiscal year begun in April, accounting for more than half of total tax revenue and occupying about 24 percent of the government's budget, according to Finance Ministry estimates in January.


"We will not be able to avoid a crisis with a consumption tax increase, but it is our responsibility as politicians to raise it," according to Fujimaki, who says the levy needs to be 35 percent to 40 percent. "Corporate tax should be cut so Japanese companies can be competitive globally. We need to make our best effort to improve the economy to delay this coming crisis."


"If the yen goes up to 120 per dollar, Mr. Abe doesn't need a third arrow," according to Fujimaki, who expects the currency to drop to as low as 1,000 when Japan faces hyper-inflation in the next two years. "Japan just has to make a weak yen: there would be no need for a fiscal stimulus package or any sad arrows."


I wouldn't go that far on the USDJPY, but fully agree on the general malaise. Once and if the Japanese debt bubble pops, it will have global implications.

A timeframe for the pop is hard to give (especially since so much debt is held in the country by Japanese institutions and citizens, there is almost no foreign pressure), but I think it will be before the Olympics in 2020.

PS: The quoted Mr. Fujimaki warned about this problem for years (so did I. by the way, beating the drum since 2009/2010...):