Thursday, 23 May 2013
Japan scares me
Japan has the highest Debt-to-GDP ratio in the world. According to IMF its predicted to top 245%. Rates have been dropping for 25years! Yet, interest payments have risen for the last 25years. Recently inflation expectations have bumped up rates. The 10-year is up 28bps relative to last month April. As yields move higher Japan becomes a ticking time bomb and will not be able to service its debt.
At their current level, if rates hit 2.8% then 100% of tax revenues to go towards interest payments only!
Japan is the 3rd largest economy in the world.
This scares me.