Standard & Poor’s Cuts Japan’s Debt Rating

Spiv_2

Yen, Stocks Drop as Standard & Poor’s Cuts Japan’s Debt Rating

Japan’s credit rating was cut by one step to AA- on concern Prime Minister Naoto Kan hasn’t done enough to curb the world’s largest debt load, S&P said today after the close of the Tokyo stock market.

http://noir.bloomberg.com/apps/news?pid=20601087&sid=aaoqMkQ0d3Tw&pos=2


The majority of Japan's debt is owned by the Japanese, so analysts keep saying that the Japanese don't have a real problem?

StevieJ

I would assume the yield would go up on news like that, in fact it has gone down (up to 10 year bonds) so investors must not be bothered, unless I have that wrong of course

http://www.bloomberg.com/markets/rates-bonds/government-bonds/japan/

tomterm8

StevieJ wrote: »

I would assume the yield would go up on news like that, in fact it has gone down (up to 10 year bonds) so investors must not be bothered, unless I have that wrong of course

http://www.bloomberg.com/markets/rates-bonds/government-bonds/japan/

The investors might have figured in the huge debt burden into their calculations. I'm surprised no one told S&P this, but Japan has had a lot of debt for the last two decades.

purch

Japan has had a lot of debt for the last two decades

Yes, but at some stage the debt will become unsustainable.

The population is ageing, and assuming that the situation where the population buys the debt will continue forever is a dangerous one.

The Japanese have a huge problem, one that has been covered up for many year, but one where the arithmetic is working against them.

michaels

And many would say our post bubble economy is just 20 years behind theirs.

lemonjelly

michaels wrote: »

And many would say our post bubble economy is just 20 years behind theirs.

:eek:

would they be correct?

StevieJ

michaels wrote: »

And many would say our post bubble economy is just 20 years behind theirs.

I would suggest that the Japan problem stems from their xenophobic attitude to immigration and falling birth rates, I may agree with you if we had the BNP (or indeed the Daily Mail :eek:) running our country.

tomterm8

purch wrote: »

The Japanese have a huge problem, one that has been covered up for many year, but one where the arithmetic is working against them.

I don't think anyone has covered up the problem, people have been saying the Japanese debt problem was unsustainable for... well.. the last twenty years.

I remember reading about it over a decade ago, in the Economist.

It's been obvious that at some stage Japan would default for at least that long.

purch

For "covered up" substitute "papered over"

Generali

StevieJ wrote: »

I would assume the yield would go up on news like that, in fact it has gone down (up to 10 year bonds) so investors must not be bothered, unless I have that wrong of course

http://www.bloomberg.com/markets/rates-bonds/government-bonds/japan/

Debt with a very long period of time until it is repaid has gone down, shorter stuff (10 years and less so not that short!) has gone up.

Isn't that the paradox of Japan? Any extra perceived risk and 'Mrs Watanabe*' wants to buy Japanese Government Bonds (JGBs) even though they are the asset class that seems to be getting riskier!




*The name of the typical Japanese housewife/small investor like Joe Bloggs in the UK or Joe Shmoe in the US.

michaels

Generali wrote: »

Debt with a very long period of time until it is repaid has gone down, shorter stuff (10 years and less so not that short!) has gone up.

Isn't that the paradox of Japan? Any extra perceived risk and 'Mrs Watanabe*' wants to buy Japanese Government Bonds (JGBs) even though they are the asset class that seems to be getting riskier!




*The name of the typical Japanese housewife/small investor like Joe Bloggs in the UK or Joe Shmoe in the US.

* And interestingly enough the name (although not Mrs) of one the Japanese girls I have gone out with.

Surely the demographics are the big story - there must come a point where an ageing population stops trying to save collectively and starts trying to live of those savings?