Massive Japanese Debt Monetization Is Coming, Yen to be Devalued

Saturday, June 30, 2012
By Paul Martin


You can only stretch a rubber band so far before it snaps back or is torn, so too is the case with government indebtedness. There eventually comes a point when the road ends and the can hits a brick wall. It appears that Japan is rapidly approaching that brick wall and there are two likely outcomes. One option is that the bond vigilantes revolt and yields on Japanese debt spike or the second option is a massive debt monetization by the Bank of Japan (BOJ). Given the massive amount of debt relative to the Japanese economy and associated interest payments on the debt, Japan can’t afford a sharp rise in yields. Thus, it appears the BOJ is likely to step in and monetize the debt and the currency markets may be signaling this very outcome.

Japan’s Debt Mountain Time Bomb is Here

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