IMF: Japan Debt Could Quickly Become Unsustainable; S&P: Japan May Be Close To a Downgrade

From GoldCore:

Geopolitical risk remains elevated and Middle East tensions are escalating globally with Russia appearing to be prepared to risk conflict over Syria with NATO and the US. Yesterday, Russian President Dmitry Medvedev threatened to target and, if necessary, destroy the U.S. missile defence shield in Europe once it is built.

A marked deterioration in US–Russian relations and concerns of a new ‘Cold War’ may support gold prices.

While all the focus has been on Europe, and to a lesser degree the US in recent months, two of the other largest debtor nations in the world, Japan and the UK (including corporate and bank debt), have been under the market's radar.

This will change soon and will likely lead to the next phase of the global financial crisis. The fact that we have a global debt crisis which will almost inevitably lead to an international monetary crisis is as of yet not acknowledged or realized by the markets and the media.

Today, the IMF warned in a new report that market concerns over fiscal sustainability could trigger a "sudden spike" in Japanese government bond yields that could "quickly" render the nation's debt unsustainable as well as shake the
global economy.

Japan's public liabilities amount to roughly twice annual economic output - a ratio worse than any other industrialized economy, including turmoil hit Spain or Italy.

Separately, Standard and Poor's says it's likely that it will cut Japan's sovereign rating again, as the government hasn't made progress in tackling its public debt burden. The agency cut the country's rating to double-A minus in January, and has had a negative outlook on the rating since April.

Japan is forecasting that its debt will exceed a staggering US$13-trillion during the fiscal year ending in March next year. S&P's Japanese director said the public finances were getting "worse and worse every day".

The ‘Land of the Rising Sun' may soon see its economic sun set as the great global rebalancing unfolds.

http://www.goldcore.com/goldcore_blog/gold-gbp-1092oz-jpy-130890oz-%E2%80%93-imf-japan-debt-could-quickly-become-unsustainable

From Bloomberg:

Standard & Poor’s said Japanese Prime Minister Yoshihiko Noda’s administration hasn’t made progress in tackling the public debt burden, an indication it may be preparing to lower the nation’s sovereign grade.

“Japan’s finances are getting worse and worse every day, every second,” Takahira Ogawa, director of sovereign ratings at S&P in Singapore, said in an interview. Asked if that means he’s closer to cutting Japan, he said it “may be right in saying that we’re closer to a downgrade. But the deterioration has been gradual so far, and it’s not like we’re going to move today.”

While Japan has enjoyed borrowing costs at global lows for its debt, the International Monetary Fund said in a report released on its website yesterday there’s a risk of a “sudden spike” in yields that could make the debt level unsustainable. Japanese government bonds fell after Ogawa’s remarks, sending 10-year yields to the highest level in three weeks.

http://www.bloomberg.com/news/2011-11-24/s-p-says-may-be-right-it-s-closer-to-japan-downgrade-as-finances-worsen.html