Japan May Trigger Next Sovereign Debt Crisis

We know the difference between the U.S. and Japan’s sovereign debt situation. One thing they have in common is that both don’t appear to have the political will to resolve this issue in a constructive way any time soon. More monetization will have to stop at some point.

From Bloomberg:

Japan may spark the next global debt crisis unless the nation’s new leader addresses its widening fiscal deficit, Kusano Global Frontier Co. said.

Japan’s 10-year yields have stayed mostly below 2 percent in the past decade partly because domestic investors hold over 90 percent of government debt, according to Kusano. Overseas investors will start avoiding Japanese bonds as the supply of the securities exceeds local demand, Kusano said.

“If bond yields spike, Japanese financial institutions will take a heavy blow, shaking the nation’s financial system,” Kusano said.

“The clock is ticking,” Kusano said. The new government “has to address debt problems urgently.”

The Organization for Economic Cooperation and Development said that Japan’s debt is approaching 200 percent of GDP, the highest among its 31 members.

http://www.bloomberg.com/apps/news?pid=20601087&sid=azo8REkdtnv0&pos=7