Pimco's El-Erian Sees "Japan Economy Recovering, Temporary Rebound In Inflation"

Tyler Durden's picture

The damage control comes earlier. In an Op-Ed just posted at the FT, Pimco executive Mohamed El-Erian has presented his thoughts on why the Japanese devastation, while disrputive, will eventually lead to another GDP surge: "Japan’s economic growth rate will fall in the immediate aftermath of the natural disasters before rising sharply due to reconstruction activities." Yet even by Pimco standards it is not all good news and the immediate effect will likely be a jump in inflation per the former Harvdardite: "Disruptions to supply chains and the loss of inventories will cause shortages and inflation to spike temporarily from very low levels. The fiscal deficit and public debt will rise meaningfully due to lost revenues and, more importantly, emergency spending. The central bank will ease monetary policy which, given policy interest rates floored at the zero bound, will involve the provision of extraordinary credit and liquidity facilities. Last, the country will receive transfers from abroad, including the repatriation of funds held outside the country by Japanese residents." What however received no mention is Pimco's lamentation that the firm will no longer be able to frontrun Japanese buying of Spanish (and Eurozone in general) bonds: a plan that is certainly put on indefinite hold.

More from the FT:

Japan is a rich country that is also able to borrow at relatively low interest rates. As such, it definitely has the ability to rebound economically from these horrible natural disasters. Moreover, in a really good recovery scenario, Friday’s dreadful shock could even be a catalyst for internal political unity and for overcoming what has been two disappointing decades of economic performance. Indeed, a prolonged period of high and sustained growth is key to Japan’s handling of its domestic public dynamics.

The world has a shared interest in the economic recovery of this systemically important country. The good health of Japan is central to a robust global economy that generates lots of jobs and enhances productivity. And, at the most basic human level, we wish for the well-being of all those in Japan who have been affected by a truly horrible tragedy.

The hope culminates as follows:

May the heartbreaking human tragedies soon give way to many stories of miraculous rescues and the full recovery of a society that, today, is being subjected to enormous pain and disrupting uncertainties.

We hope in this case El-Erian is correct. In the meantime, the question of where the yet more demand for sovereign debt will come from as Japan is now forced to issue billions more in paper will certainly be answered in Bill Gross' next, and certainly far more dour,  upcoming missive.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
MsCreant's picture

El-Erian is an exposed rod.

CPL's picture



Considering their bread basket just got washed over by a slurry of whatever stuff cities produce and Tokyo is now glowing.  I'm not sure how anyone can come out and say "Things are GREAT folks, move along."


It should be a law that if someone is announcing that the situation is normal and nothing is wrong, that they stand right next to the object that is "fine".  In El-Erian's case, right next to the nuke plant.

Arch Duke Ferdinand's picture

""It should be a law that if someone is announcing that the situation is normal and nothing is wrong, that they stand right next to the object that is "fine".  In El-Erian's case, right next to the nuke plant.""

Radioactive Releases in Japan Could Last Months...


jus_lite_reading's picture

+1. Good point. Too many trolls and plants using the junk button..

Spalding_Smailes's picture

Wonder if he has this on his desktop .....


• Live Feed - Geiger Counter Tokyo •




Also, this one is located in Japan but no location given .....


william the bastard's picture

I can't recall a single topic upon which Mohamed El-Erian has expressed an opinion that turned out as he expected.

Spalding_Smailes's picture

He's selling his book again ....


Sorry, 1st link is Koto City and the 2nd link is in Ota City.


How to read a geiger counter.





whatsinaname's picture

A comment from a friend in Japan - the Western region of Japan has plenty of spare electricity BUT cannot supply the eastern region because of frequency differences and network incompatibility. Also, lots of food, water shortages in Tokyo stores since lots of food comes from Northern region as well as via the key ports on the NE side.

fuu's picture

That and the loss of every power line east of the foothills.

jus_lite_reading's picture

+14 Trillion! I have lost all respect for Mo. I also predict that in 200 years, the Japanese economy will recover also. Now pay me $300 million and I'll look all pretty for the camera!

UninterestedObserver's picture

Get with the script people:

Earthquakes - bullish (over 400 off the coast of Japan last 7 days and don't look at a map of earthquake activity in Cali last week)

Tsunami - bullish

Nuclear disaster - super bullish


Pole shift - ultra uber bullish



RobotTrader's picture

No doubt, "Sugar High" El-Erian will be forced to "put his cash to work" by buying stocks, if he doesn't think bonds are going up.

I noticed that the PIIGS banks are on fire today, BBVA up over 4%, STD up 3%, etc.

Internet Tough Guy's picture

Retail stocks will rally big tomorrow, PM's will get capped once again
RobotTrader - Sun, Mar 13, 2011 - 11:52 PM

Same old, same old....

What else is new??

RoRoTrader's picture

If PIMCO is looking to invest cash why not wait until equities really correct? What is the hurry?

TruthInSunshine's picture


velobabe's picture

i think Mo Mo el, has a lisp. not that i would demean anyone with having a lisp, he probably has to over come far greater obstacles in his career. well, like listen to gross and his weird tongue of talk.

Don Birnam's picture

The two most irritating, grating, creaks-like-a-rusty-doorhinge voices possessed by males of the human species: Laszlo Birinyi, and Bill Gross. 


doomandbloom's picture

natural disasters are better than war...who would have thought..

if the Japan event was HAARP then expect something similar in California too...

Sudden Debt's picture

God is helping a hand!


now about that Yellowstone park thingy...


CPL's picture

The Yellowstone Caldera.  If it went up in smoke, most of North America would have around five minutes to shotgun a beer, bend over and kiss their own ass goodbye.  Appearently it's overdue for a big blow and is one of the reasons we've figured out that volcanoes tend to set each other off like a string of firecrackers.  Appearently teh Yellowstone Caldera has blown three times that is known in 2.1 million years according to this article.


equity_momo's picture

I can only imagine how high the futures would get juiced in those 5 minutes.

jus_lite_reading's picture

Who knew? Doom is great for the markets!




I hope they're ready once Fukushima blows! Good bye Tokyo... Radiation levels from a counter can be seen rising...

jus_lite_reading's picture

I know. It has become a daily read along with Zh of course!

Sudden Debt's picture

They'll print more money to make the inflation go away.



And Saint-Bernanke did what was asked of him.


And Obama did what was asked of him.


And in return for all the hard work they did, they got to spend the rest of their lives in the Caymans without a care in the world!



let's just hope that the evil speculators won't spoil it and cause inflation anyway.... AL QAIDA DID IT!!




RobotTrader's picture

Yep, just as I predicted.

Market selling off, yet XRT and IYR are once again "unfazed"....

TruthInSunshine's picture

Anything market related has The Bernank's greasy fingerprints all over it.

Anon will get The Bernank's archived emails and electronic correspondence, and fun will ensue.

reading's picture

That seems to be going about as well as your gas prices in California are going no where but down theory.

joemayo's picture

Just imagine if the entire world were devastated by disasters!  The GDP increase due to rebuilding efforts funded by new liquidity would be enormous, foerever and ever, eh Ben? 

Verily, this is the path to full employment and everlasting boom.

centerline's picture

George Orwell would be proud.

MsCreant's picture

new liquidity = irradiated salt water and steam

everlasting boom = Ka-boom

MachoMan's picture

Literally some dumbass was on Good Morning America this morning stating exactly this...  the disaster is good for Japan's economy because they will have to rebuild with newer technology...  I guess this means I should go bulldoze her house?  Seeing as how I am into helping and all...  and the worst part, her comments went uncontested...  none of the other anchors even raised an eyebrow...  really folks?  Is it that hard to just at least cough bullshit or say it under your breath?

Rodent Freikorps's picture

They read teleprompters for a living, dude.

Why would you assume they know better?

MachoMan's picture

I don't assume they could find their way out of a paper bag, but others are not so skeptical...  unfortunately...  [I thought that was what santa claus was all about?]

Diogenes's picture

"Just imagine if the entire world were devastated by disasters!  The GDP increase due to rebuilding efforts funded by new liquidity would be enormous, foerever and ever, eh Ben? 

Verily, this is the path to full employment and everlasting boom."

Yeah! Let's all cancel our insurance, burn down our houses and get rich rebuilding them!

centerline's picture

Sooooo.... let me get this straight....  destruction = demand for debt = good news for Pimco.

Hmmm.... El-Erian is either smoking some good stuff or is helping show how truly screwed we are (or both).


Sudden Debt's picture



RALLY DOW  +20.000!!!


bigking12345's picture

and he loves the NY mets, what a losers, the invisible hand holding up the market today will kill all the widows and orphans soon.

RobotTrader's picture

Yep, AAPL and NFLX both rocketing.

They never even went red today.

Most overvalued, overpriced issues are still in hot demand.

Must be those CANSLIMMERS getting back in after getting chased out on Thursday.

Josh Randall's picture

Go make your money then, stop Trolling

bingaling's picture

Robo writes the truth = He even puts commentary to how bizarre the trades are . I don't get the junks he is a daytrader and he calls the day bullish or bearish .

reading's picture

You should know never say never...


TradingJoe's picture

I sat down over the weekend, enjoying a good 25Y Bourbon and a nice cigar and tried to contemplate what could bring this market down....

Answer: A TOTAL REMOVAL OF WS AND DC! Nothing else can, or so it seems! We are still leveraging up and gorging on cheap money from the good old american taxpayer!

Sometimes I wish something really bad happens so that we can start anew but then again,

it will be same ol' for the few and the many! WS and DC are in utter total control of the US of A and there seems to be no escape but one.....use your imagination! (If TV didn't kill that too)!

nobusiness's picture

Is there anything that is not bullish for the market?

John McCloy's picture

Aside from extinction event I believe not. Bear markets have been outlawed.

Hondo's picture

Kind of silly actually.....recover to what??  when??  just cleaning up the mess is some sort of recovery........sometimes these people just need to shut it

-Michelle-'s picture

The faux sensitivity he applied over the pools of slobber was a nice touch.

High Plains Drifter's picture

The economy will recover?  Recover to what?