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Saturday, January 11, 2014

Feldman: Japan Collapse in 2-3 Years Possible

The latest entry to the JGB Collapse prediction list is from Robert Feldman. I do not have access to the original report this is based on, but I have some quotations from a Bloomberg article.

The Japanese government has two to three years to curb expenditures or face a possible crisis, according to Robert Feldman, the head of Japan economic research at Morgan Stanley MUFG Securities Co. 

“There’s the risk interest payments would swell should the government fail to cut budget deficits when inflation and yields grind higher,” Feldman said in an interview in Tokyo on Jan. 8. “Absent an increase in tax revenues stemming from a tangible improvement in the real economy, there is a risk of collapse.”
His prediction matches what I think would be the cause of a collapse: rising Japanese inflation forcing rate hikes. I admit that I may be too complacent, but I do not see the current fiscal outlook leading to that outcome in the next couple of years. In fact, I am more worried about the contractionary impact of the consumption tax hike at present. (There will be an element of "bad inflation" that results from the tax hike, which most observers will justifiably make corrections for.)

(c) Brian Romanchuk 2014

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