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Thursday, November 14, 2013

Cry "Havoc!" And Let Slip The JGB Bears!

We have a new entry for the "JGB Collapse" prediction log. In "Why Has Japan's Massive Debt Not Wreaked Havoc (Yet)?", Charles Yuji Horioka, Takaaki Nomoto and Akiko Terada-Hagiwara look at the Flow Of Funds data for Japan. They argue that flows related to the financial crisis have allowed the JGB market to avoid collapse. The article is academic, so they do not have any juicy JGB yield targets.

I am assembling the Japanese flow of funds data on my personal research system. I may take a longer look at this paper once the data are ready. However, I am not convinced by their concerns around the need for foreigners to buy assets to fund a Japanese current account deficit. The Japanese have a very large stock of foreign currency assets, and so there is no need to convince foreigners to buy anything to finance a current account deficit.
 
(c) Brian Romanchuk 2013

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