but Gold in JPY continued to rise until its peak in February / April 2013, as a result of the depreciation of the JPY against the USD.
I don't aspire to prophesy something grand and momentous, unlike HeroZedge, so I am not sure how I feel about the comparison . And, indeed, like you point out, crises come in all shapes and sizes. Ignoring the possibility that a developed economy can have a traditionally EM-like balance of payments crisis is foolish. BTW, that article is exactly why I dislike HeroZedge. I mean apart from the fact that he cherry picks his facts to make the conclusion appear more shocking and doesn't present the entirety of evidence. Modern Japan won't be the first "sovereign LBO by a central bank" by any means and to suggest this is naive.
You reap what you sow, innit? Modern Japan is a perfectly logical conclusion of a very particular set of policies. In fact, it's democracy in action.
If it occurs, it doesn't matter to me whether or not this is the first "sovereign LBO by a central bank". Apart from that, did you notice any other flaws (or cherrypicked facts / incomplete evidence) in the article?
Ok I had not considered wholesale bond cancellation. I guess the point here is that something must crash - save the JGBs by ruining the currency or pull back from that (stopping QE) and crash the JGBs (when talking in these extreme scenarios). For all our sakes though, I hope neither of these occur...
History is a gallery of pictures in which there are few originals and many copies. Alexis de Tocqueville
The main flaw in HZ's type of analysis is that it's just not right to focus on one side of the country's balance sheet. Japan has a LOT of domestic savings that have historically financed the government's deficit. That's been the "Grand Bargain" in Japan. The world, however, has changed and they're trying to engineer the transition away from a "model" that clearly hasn't worked. This is what we're observing now. My point is simply that when you look at these things, you need to look at the country as a whole, rather than just the central bank. This is especially true in Japan, where all these issues are VERY political and the central bank's balance sheet is an instrument to be used. If you want to read a very balanced piece about Japan that I really liked, here it is (I might have linked to it previously): http://www.macrobusiness.com.au/2013/06/we-need-to-talk-about-japan/
what is that very reason japan will default? assuming lack of inflation, it can always monetize its debts
http://news.sky.com/story/1160080/osborne-to-stop-short-of-full-rbs-break-up another call has been made to the ppt to send out a broom and sweep this under the carpet,how are the banks in japan doing,if you were trying to sell and move off the island, who would buy
It depends on how you define "default". It may be able to monetize all outstanding JGBs, but if it did this, it's unlikely inflation would remain low, and likely the JPY would depreciate against currencies where there wasn't as much money printing.