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Who is going to bail out Japan !

After a long time of European debt problem it looks to me suddenly all wake up. Few days ago we heard about Chinese buying of Spain debt and in past the deals with Greece and Portugal. Now it is Japan who wants to help Europe through debt  buying.  as their minister told that Japanese Govt. plans to buy more then 20% of  the bond offering of EFSA.
Like China, Europe consumes large amount of Japanese export. Japan is the 2nd largest nation after china holding massive foreign reserve of 1.09 trillion. Now they don’t reveal the quantities of different ingredients of their reserve but it is sure  EURO must be a big portion of that. As  their finance minister said that they will use their  EURO reserve for this purpose. That means we are not going to see any effect in currency market for this debt purchase.
What I think,  is not it be good if Japan buys this debt in  Yen  rather than Euro

Japan’s position is quite unique, one side it is facing deflation from long time as a result of this there is not much growth in business and negative impact on the sentiment of the people, on the other side it’s  YEN appreciations reflecting negative effect on export market. Now in this situation what the general people  will do ?   Where they will  put their moneys ?

Japan is facing long term deflationary effect, if things go this way it will be hard to remove deflation.
Stock market in Japan,  continues it’s up move &  some people thinks  it is overbought.  People are not making much new investments in business because it may be not profitable. So they are putting their  money in banks. 
Now  Govt.  is  suffering all the negative effects of economy. Bank deposits are growing constantly and exceeding loans, as I told that companies and general people are not taking much loans in this circumstances, so who will save them ? The last resort the Govt.  Japanese Govt. is taking the loan through  Govt. Bond selling.  Now what is the aim of this ?
Very simple, if Japanese Govt. don’t sell this bonds economic growth may turn into negative. If economic growth turn into negative things will be worse. Let see Japan’s  GDP growth rate.

 Actually in this condition Banks and many Insurance Companies  borrow money in low interest and invest in these high Yield Govt. Bonds , this way they are making huge profits. These is the case not only in Japan but also in  USA, U.K.  and other countries.
Japan’s increasing Govt. Debt  may touch more than 200% of it’s GDP.  Quite big !
One positive point for Japan’s outstanding debt is the domestic saving, which is 1.5 times. So Govt. can still  borrow until  reaching to that limit.
As japans population is aging  and their life expectancy is increasing , insurance companies are buying lot of these long-term  Govt. Bonds. But we shouldn't forget that one day this luxury will end.     Then  what  ?
If situations go in this way we may see some one has to bail out Japan also.

NOTE :  Please see the disclaimer of this blog .


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