Getting "spanked" is the right wording for hedgies being "terminated" on JGB trades. Always good if 90 % of government issuance is in domestic hands. :=)
You're right, the JPY is strong now, and that the JGB funding issue is not an issue now. But that's the thing: it's not an issue - until it is. And then (if and) when the Japanese can no longer finance the massive debt burden and massive deficit burden, is when there is a possibility of big JPY depreciation and possible high inflation / hyperinflation.
Exactly! But why? Then what? And then what? And before the other ?s, what if? Damn, can't believe I might have found a similar mind. I'm probably hoping too hard.
Here is an article that suggests that Japan's financial position isn't as bad as some believe: http://pragcap.com/japans-financial-position-is-better-than-you-think
This is also relatively detailed: http://fistfulofeuros.net/afoe/surely-there-is-nothing-“funny”-about-what-is-going-on-in-japan/
thanks for that link Martinghoul. Just wondering if you can share your thoughts (and/or trading positions) on the Japanese fiscal situation? For what it's worth, I have a tiny position long USD/JPY in the high 83s (obviously underwater), but I will add if and when Japanese 10-year yields rise substantially, and/or USD/JPY fails to fall in a "risk-off" scenario.
My view is that the Japanese situation is dire, but they're suffering from the sort of chronic condition that is likely to take years, if not decades to actually show symptoms. So I am not one of these people betting on a Japanese collapse that you hear about on the news. If I had to do it, I would do it using some very long-dated JPY puts, where I am happy to completely write the premium off. Moreover, I am not sure I want to use USDJPY, given the situation in the US. I am long a wee bit of USDJPY, but that's more of a small intervention punt than anything fundamental.
yeah with the benefit of hindsight I should have held the USD/JPY that I bought below 77.50 for a bit longer into the mid to high 79s. I sold it within an hour (or two?) in the 78.30 area. Well hindsight is 20/20. As for my USD/JPY position, I agree completely about the fiscal situation in the US. That's why my long gold (in US Dollars) position is many times larger than my tiny long USD/JPY position. I strongly believe that the long-term situation in the US (and many other countries) is much worse than it was in September to November 2008 or March 2009. Obviously in the short-term the 'kicking the can down the road' is all that matters to the myopic financial markets. But as we've seen with oil (especially Brent), loose monetary and fiscal policies don't just affect equities. Anyway I'm getting off topic here. I've written extensively in other threads about my views on oil and airline stocks. Thanks for your input in this thread.
Jim Quinn of The Burning Platform on Japan's debt and demographic problem: "Land Of The Setting Sun" http://www.zerohedge.com/article/guest-post-land-setting-sun http://www.theburningplatform.com/?p=13311