Abe 2.0 Begins - Step 1 Remove All Budget Limits; JGB Yields Crack

Tyler Durden's picture

Well that did not take long. T+2 days from his re-election, Shinzo Abe has summarily unbudgeted himself. As Kyodo News reports, the sphincterially-challenged wild-man has decided to scrap the country's spending cap for the annual budget. Previously capped at a measly JPY71 trillion (excluding debt-servicing costs) in an effort to create some pretense of fiscal discipline, the new Keynesian has unilaterally decided that moar is better. Not exactly helping, though perhaps exactly what the currency-war-inflaming Abe might like, the trade balance plunged yet again (to -JPY953bn from -JPY540bn) from  - setting a new all-time record negative average as the implicit capital flight continues. JPY weakness has resumed but it is the collapse in JGBs that will be worrying people - the biggest 5-day run-up in 10Y JGB yields in over 13 months.


10Y JGB yields are on a tear...breaking above the 100DMA...



Japan's Trade Balance pushes further and further south...


AsiaPac not having a great night overall with Aussie Leading Indicators plunging to their lowest in nine months...


Chart: Bloomberg

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flacon's picture

Can anybody explain gold's massive plunge today? What happened and what caused it to get thrashed like that as the USD was going down?

NoDebt's picture

Congress and the White House are expected to pull off a compromise to fix the fiscal cliff which will grease the skids for a real prison-style take-down of the deficit problem later in the year.  So, things are on the mend, fiscally speaking.

And if you believe that will happen I've got a bridge to sell you.

CPL's picture

Trade you for this sack of magic beans.

tmosley's picture

Damn the nukes, FULL SPEED AHEAD!

nmewn's picture

Liquidation maybe.

I was in a bank this morning. I told them I had checks of X amounts drawn on them and would they be able to cash them. The answer was yes but they said they would have to order the money to the branch and she said I'm not the only one.

For what its worth...it looks like they are having to change from the digital to the real and the digital is having a heart attack...lol.

philipat's picture

The Japanese economy has gone nowhere for 25 years. Great idea, let's try more of the same??

kliguy38's picture

NOW ya know why the Japanese will be buying gold by the tonnage this year.........that Barbarous relic!!

Piranhanoia's picture

"the sphincterially-challenged"   One of these days the cuff coffee will be flowing everywhere

booboo's picture

or how Uncle Ben showed us the Banzai enema.

game theory's picture

Poor China...first Bernanke and Obama, now Abe. 

Jason T's picture

not worried about China, they will undoubtably come out of this mess on top.  

oak's picture

It could be a counter move to Bernanke. otherwise, japan's economic would be in deep trouble. What they care about china for ? none.

ball-and-chain's picture

These guys are sharp.

They can keep the balls in the air for a long long time.

Japan's had their balls in the air for almost twenty years.

America is the new Japan.

We're following their lead.

Domo Arigato.


CPL's picture

It was the US dumping ground for inflation for years before China smartened up.  Still is.

gould's fisker's picture

"Unbudgeting oneself", don't give the beard any new ideas.

LongSoupLine's picture

Kyle Bass waits...patiently.

fonzannoon's picture

wait japan was 200% of debt to gdp and they had a budget and we don't?

alfred b.'s picture


     Oh but we do have a budget:  On one side of the ledger, we have Barney,,,'let's spend a little here & more there...' and to offset that we have the Barnank 'can't wait to start printing those 500$ bills'....so, no need to worry about silly little indrances like budgets!

   Buy physical gold and silver!


Being Free's picture

You be o.k., you buy bond, girl love man with big bond.

max2205's picture

Soooo the 30 yr yields 0.01% now

nmewn's picture

You such a Boner, me just won!

No debt limit now or we go over the crifff...BANZAIIIIIIIII!!!!!!!

ziggy59's picture

First they promise...then they lie....
scratch that!

First they lie....then they lie more, again, still.

chump666's picture

Poor Japan, they got f*cked by the leaders.  To think they were warriors once, now...

They are going to force you into a conflict with China, hoping that the US will be the military backstop.  Your leader is insane with a loose a-hole. 


gwar5's picture

Dumb question....


I've been wondering why JPY stays so strong vs USD (all these years) while they are a bigger basket case than the USA, and their interest rates have been stuck near zero the whole time?


Exports and prevailing trade balance? Deflation with not massive enough printing? JPY carry trade? What part am I missing? Anybody?





fonzannoon's picture

Their citizens have savings and continue to be loyal to their bonds. They will hit a wall at some point.

duncecap rack's picture

It is going to be hard to keep the citizens on board with bond yeilds so much lower than the agressively targeted inflation target.

fonzannoon's picture

the only thing I want to know is when they are staring down the barrell of the gun do they dump their trillion in treasuries?

gwar5's picture

Wonder if the Japanese pats even be allowed to dump them if the ROW is doing the same... we won't if 401Ks get sucked in.


I keep getting the impression TPTB are coordinating the banker countdown clock around the world so everything can collapse at the same time so they won't get any shit from any of the sovereign sheeple when everything is converted to the BraveNewWorldWhatever.

gwar5's picture

Thanks! I was aware of that but had no F'ing idea it was near enough to make it all up voluntarily... guess that's why their demographics are so ugly now. Scary thought since Bernanke et.al., are considering involuntary forced buying of USTs by Americans via confiscation of 401Ks. 



gwar5's picture

Oh, and regarding most Honorable Japan...


Bang Dai Ho says: "Me feel certain Japanese new Finance Minister to be named, Hoshe Bindun Banged."



chump666's picture

It's considered the best in the worst FX market.  Asia/Middle East have huge black-market USD markets, more so China.  Iran loves the USD etc etc etc.  Asian cb's are pure interventionists in FX/cross markets, they will sell vast amounts of their currencies and buy USDs daily.  Abe just declared FX war on the JPY crosses against the KRW and other Asian currencies.  To me, he has up the ante with China.  No doubt tensions will increase, dangerous man.

So for 2013 regarding relative USD strength = the huge problems developing in Asia, from geo-political tensions through to outright inflation to hyper inflation (Like Brazil in the 90's that loved the USD).

We are speeding into a market that both the inflationists and deflationist will be perplexed by, just total chaos in all markets.  Got that locked for 2013.

Correlation against equities have been distorted due to HFT trading, but the DXY is  quite strong against stocks, which should indicate liquidity tightening.  The rally should be capped, but y'know...machines do what they want.  It's not the fiscal cliff.

gwar5's picture

So, demand for JPY=demand for USD (WRC) through a backdoor? Makes sense, too.  Does Geithner know about this?  /s



Yen Cross's picture

 You did a pretty good job answering your own questions "gwar5". Japan is an export economy, with a high savings rate via Kampo/postal system. The high savings rate, trade surpluses, and low carry costs made the yen a good safe haven currency.

 It has been smoke and mirrors for quite some time though. As we are now seeing ;-)

NoDebt's picture

Who woulda thunk that the real debt crisis would be triggered by the country that for years has led the pack in Debt/GDP ratio by a WIDE margin?  It's a head-smack "I coulda had a V8" moment.  Coming soon to a developed country with a rapidly aging population near you!


papaswamp's picture


hooligan2009's picture

if the BoJ buys foreign bonds, does the target countries central banks have to sterilise the BoJ intervention in order to maintain its preferred level of quant easing? (US at 45 billion a month in Treasuries plus $40 billion a month in MBS or the EBC's 2 trillion balance sheet or the old lady's £375 billion).

i mean its one thing to debase your own currency, but when someone else starts doing it? or is the buying of the dollars, euros or sterling and subsequent purchase of bonds count as sterlised non-intervnetion?

if the BoJ sells yen (as instructed by the MoF) whats the difference between any fiscl and any monetary policy in any country?

stinkhammer's picture

gangnam style bitchez!

malek's picture

"To infinity ... and beyond!"

steve from virginia's picture




Both the Japanese and European car industries together take the knife in the neck ... time to twist it slowly so the blood flows and the bodies writhe in mortal agony.


Here is the swan song of the world's greatest and most destructive industry in real time with the world watching. What a privilege.


It seems the European default debacle will occur in Japan first: Greece (done), Japan, Spain then France ... then Portugal, Ireland and Germany, China then the US.


Keep in mind, permanent fuel shortages will occur before the end of 2014 even if every policy move is made precisely. If Japan defaults or Spain the policy moves will be proven failures ... fuel shortages will occur with remarkable rapidity.


Permanent means ... forever. Forever means ... + 100 million years.


New miraculous supply of frakked crude oil is irrelevant, and likely to remain in the ground. What matters is the consumers' ability to afford oil at all. With the car industry on its way to the morgue -- stabbed to death by high crude prices and exploding credit costs -- it is not possible.




AynRandFan's picture

What's the half-life of Abe's reign as PM this time?  Not long probably.

q99x2's picture

Glow in the dark M'Fer.

Frastric's picture

Abe... A scare-monger's best friend...

honestann's picture

Japan is so far gone, it actually makes sense for the government to simply print up enough yen to buy back every debt instrument, then do so.  Of course, that's not ethical, but the predators-DBA-government have already taken actions that make it absolutely impossible for any ethical solution to be found or implemented.

As crazy as it sounds, they'd probably be wise to print up fiat yen and buy back 100% of japanese government debt, then implement a ZERO debt mandate (in whatever passes as their constitution) to prevent the government from EVER borrowing even one more yen... ever.  Oh, and if they wanted to really do it right, they should take 90% of the assets of everyone who has ever worked in government or as an executive in a large corporation who got lots of government contracts over the past 20 years, since their wealth was stolen from the bond-holders about to be raped.

While the "print and retire bonds" would crash the yen, an absolute prohibition on future debt would make the yen a very attractive fiat currency (relative to other fiat currencies but of course not gold).

But such a simple, straightforward "get it done with" approach is too close to an honest approach, so it won't happen.  They'll just destroy everything until the people are so destitute that they have no choice but revolution or permanent abject poverty.

And people still say "debt is an appropriate thing", and predators like Krugman still repeat endlessly that "debt is the most wonderful thing known to mankind".  Of course what would you expect someone who wants to be the next fed chairman to say?

CPL's picture

Welcome aboard the good ship Batshit Insane International Finance honestann.


But it's not 100%, it's 200%.  The US is currently at 102?  104? of GDP print.  Japan also has a trade slump because all of it's exported goods have been shown to offer value added features in all their food and electronics like unaccepable levels of radiation.


It's so bad Vietnam actively stops rice shipments from the Island nation to test it before it enters into the super markets.  Remember radiation is something that gets to be shared for 5400 years until it's safe.



honestann's picture

By 100%, I meant 100% of ALL outstanding debt.  ALL of it.  Wipe the slate clean, then never borrow another dime.  Pure AAA approach.  No more booze.