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.

Herman Venegas

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