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Ex-Soros Advisor Sells "Almost All" Japan Holdings, Shorts Bonds; Sees Market Crash, Default And Hyperinflation

Tyler Durden's picture


Previously, we have pointed out why Japan's attempt at reincarnating its economy, geared solely at generating a stock market-based "wealth effect", and far less focused on boosting the country's trade surplus or current account, is doomed to failure, namely due the drastically lower equity participation by the general population and financial institutions in the country's stock market. Sure, foreign investors will come and go renting each rally for a period of time, but unless the local population participates in the "reflation attempt" (which has already sent the price of luxury goods, energy and food through the rood), or in other words change the behavioral patterns of two generations of Japanese in under two years, the inflationary shock will simply leads to a loss of faith in the government and ultimately Abe's second untimely demise. Not surprisingly, 4 months after Japan set off on the most ludicrous economic experiment in history, and one week after the BOJ announced its plans to double its balance sheet, Abe's approval rating has already begun sliding with a poll by Asahi just reporting that popular support of Abe's cabinet is already down to 60%, down from 71% a month ago.

The reflationary reality has finally started to get official recognition with the very Goldman Sachs (who like in Europe and the US is behind this epic experiment in hidden taxation of consumers) asking how popular inflation would be in Japan, and answers:

How popular will inflation be in Japan? Assuming the BoJ is successful and inflation rates rise, one interesting dynamic will be the political support for 'super-easy' monetary policy. The majority of financial household assets sit in deposits, which until now have earned a positive real rate. While long-term inflation expectations move higher, the Yen and equities re-price rapidly but the negative impact on deposit returns from negative real rates will only be felt once inflation has actually started to materialise. This is clearly not an immediate concern as the government’s approval ratings remain high ahead of the Upper House elections this Summer. Still, PM Abe’s policy aim of beating deflation may become less popular at some stage because the implied distributional choices of higher inflation may become clearer for voters. For example, higher inflation would re-distribute real income from (older) savers to (younger) wage earners. But again it is worth thinking about the exact sequencing. By the time inflation in Japan becomes settled in positive territory the Fed may well be on the verge of hiking rates. In essence, any concerns about inflation in Japan and debate about a BoJ policy response will likely arrive at a stage when Fed tightening and JPY carry trades have already become the dominant theme.

In short, yes, Japanese inflation will destabilize the economy, and almost certainly lead to yet another political upheaval, but by then Japan will have served its purpose and injected some $1 trillion into the US stock market, thus supposedly allowing the US economy to become self sustaining. Or not. As to the consequences that the demographically-challenged Japanese population has to face as it suddenly finds itself holding worthless pieces of paper... who cares.

Which means that Abenomics will ultimately fail to fix Japan, but at least there is some hope it will last long enough to send the S&P to even more ridiculous highs - which, when one cuts out all the noise, it really what the whole experiment is all about.

For Japan, there is still some hope that the country will stop this ludicrous experiment merely serving to feed US risk assets before it is too late. Luckly, we are not the only ones seeing the writing on the wall. A month ago, it was "Mr. Yen", former finmin Eisuke Sakakibara, himself, saying "Abenomics" is going to fail.

"In terms of two percent inflation, it ['Abenomics'] will fail. Deflation is structural. Even at the time, when Japan was in the upward [growth] swing between 2002 and 2007, prices went down. It will be extremely difficult to get out of deflation," said Sakakibara, also known as "Mr. Yen" for his efforts to influence the currency's exchange rate through verbal and official intervention in the forex markets in the late 1990s.


According to Sakakibara structural deflation in the world's third largest economy is largely a result of the integration between the Japanese and Chinese economies and hence near impossible to move away from.


"Cheap Chinese goods come into Japan and push down the prices. And a lot of Japanese companies go to China to manufacture goods — so it's not going to change," said Sakakibara, who is currently a professor at Aoyama-Gakuin University in Tokyo.


According to Sakakibara, dollar-yen between 90 and 95 would be most favorable for the economy.


"I remember in 1998, 1999 — it [dollar-yen] did go to 150 — I was at that time in the government, I was terrified," he said.

Moments ago, it was none other than Takeshi Fujimaki, Soros' former advisor on all matters Japanese, who tripled down on the warnings, and told Bloomberg that the Bank of Japan’s “huge bet” by boosting quantitative easing won’t turn the economy around and is instead sending the nation toward default.

“By expanding the monetary base to 270 trillion yen, the BOJ is making a huge bet which I think it will ultimately lose,” Fujimaki said in an interview in Tokyo on April 11. “Kuroda’s QE announcement is declaring double suicide with the government. The BOJ will have to share the country’s fate and default together.”

Why? Same reason we have been pointing out every day for the past week, the same reason the Japanese bond market is now essentially broken with daily trading halts becoming an expected feature:

“The volatility in the JGB market as well as the fact that there is large selling represent fear among investors,” Fujimaki said. “They are early signs of a larger selloff and we should continue to monitor the moves in the long-term bonds.”


Fujimaki said he recently bought put options for Japanese government bonds of various maturities, without elaborating. He continues to hold real estate in Japan and options granting the right to sell the yen against the greenback expiring in less than five years. He also holds assets in U.S. dollars and currencies of other developed nations.


Japan’s finance is sinking into the ocean,” Fujimaki said. “There’s no escape from a market crash in the future when you have such enormous debt.”

And the punchline:

By expanding the monetary base to 270 trillion yen, the BOJ is making a huge bet which I think it will ultimately lose,” Fujimaki said in an interview in Tokyo on April 11. “Kuroda’s QE announcement is declaring double suicide with the government. The BOJ will have to share the country’s fate and default together.”


“Shirakawa did more than enough and he had good reasons to not do any more,” said Fujimaki. “There will be tremendous side effects from monetary stimulus. QE doesn’t work and has no exit.”


Things may look rosy for now as stocks rise, but should we see hyper-inflation, JGBs will see a huge selloff, leading to a stock market crash,” said Fujimaki, adding that he sold “almost all” of his Japanese stock holdings some time ago.


And people thought Kyle Bass was bearish.

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Sun, 04/14/2013 - 21:25 | 3448015 kill switch
kill switch's picture

He is mind kind of....

Sun, 04/14/2013 - 21:27 | 3448018 Supernova Born
Supernova Born's picture

Sounds like his vision is clear.

Sun, 04/14/2013 - 21:28 | 3448024 fourchan
fourchan's picture

he looks good at math. im listening.

Sun, 04/14/2013 - 21:38 | 3448052 earnyermoney
earnyermoney's picture

Next thing you know, Paul Krugman will call this guy a deranged libertarian doomer hiding in his bunker.


Who's the expert on the markets? Dude who's earned his keep in the markets or Paul Krugman, fascist shill of the Ivy League elite.

Sun, 04/14/2013 - 21:39 | 3448054 THX 1178
THX 1178's picture

Ex soros adviser sees market crash. Hmmm. Funny... I'm detecting the same thing.

Sun, 04/14/2013 - 21:46 | 3448068 Manthong
Manthong's picture

What’s the big deal?

It’s not like a quarter quadrillion yen is real money or anything..

Sun, 04/14/2013 - 21:58 | 3448110 Scarlett
Scarlett's picture

OMG this is impossibro! 


"Bonds are garanteed by the Japanese Government.  Please don't worry."

Sun, 04/14/2013 - 22:01 | 3448122 Richard Chesler
Richard Chesler's picture

Where is that fucker Krugman?

Sun, 04/14/2013 - 22:57 | 3448420 Scarlett
Scarlett's picture

Dr Paul Krugman can't be reached, as he is masturbating in front of his new set of laserjets MFP M276 and M251.

Mon, 04/15/2013 - 02:54 | 3448805 AldousHuxley
AldousHuxley's picture

default AND hyperinflation?


This guy just want you to sell yours before inflation takes Japanese stocks to sky rocket. Only when US and China stops Japans money printing will they settle back down.


Japan's fault is mimicking British Empire instead of doing it like China mimicking American Empire.

Mon, 04/15/2013 - 06:38 | 3448983 gold-is-not-dead
gold-is-not-dead's picture

how can shortage and price drop exist at the same time?

it just doesn't make sense...

Mon, 04/15/2013 - 10:00 | 3449717 Overflow-admin
Overflow-admin's picture

"Q. If Japan has a financial collapse, what will happen to its government bonds?

A. Please do not worry."

That is the exact quote.

Sun, 04/14/2013 - 21:54 | 3448095 CheapBastard
CheapBastard's picture

Japanese cars (for foreigners) are gonna get cheaper...maybe.....


I'll grab two when each is 5 oz of the yellow metal.

Mon, 04/15/2013 - 05:45 | 3448895 TJ00
TJ00's picture

Given that Japanese car factories are highly automated surely the costs in Yen will go up with the increase in energy and raw material prices, thus not getting cheaper in foreign currencies, unless you're suggesting that the massive increase in energy and raw material prices will bankrupt the car companies so their current stock of cars is sold off cheap in liquidation?

Sun, 04/14/2013 - 21:55 | 3448097 Calmyourself
Calmyourself's picture

"good at math"  droll, dry and hilarious

Sun, 04/14/2013 - 21:29 | 3448028 Clint Liquor
Clint Liquor's picture

He forgot to mention the nearly $1 Trillion in UST held by Japan. No worries, the FED will buy them.

Mon, 04/15/2013 - 00:12 | 3448621 WallowaMountainMan
WallowaMountainMan's picture

no, no no.

japan uses them to buy jgb. corrals all jgb debt as possible. then and only then takes the hit and forgives all their self owned debt. debt that people were rapidly and gleefully selling to the boj. for, um, dollars...japan debt now transfering to dollars.

yea to the reserve currency...onboarding euros next i guess....

bernanke has no choice but to slow qe but its gonna be a show. there are a lot of dollars out there floatin around. alot of dollars lookin to land...here.

sell, ben, sell !

no wait.

buy, ben, buy!



Mon, 04/15/2013 - 00:15 | 3448627 Kirk2NCC1701
Kirk2NCC1701's picture

With what, a Ctrl-P, or an Excel entry?

Except that their Excel is backed by more than MS: DOD. /s

Mon, 04/15/2013 - 08:11 | 3449279 asteroids
asteroids's picture

Fear not, when Japan needs cash they'll dump them for whatever they can get. That'll be a fun day.

Mon, 04/15/2013 - 08:04 | 3449252 backwaterdogs
backwaterdogs's picture

someone's vision is not....

Sakakibara saying abenomics will fail to inflate at and Soros' man saying the plan will because it will hyperinflate....wth?

Sun, 04/14/2013 - 21:56 | 3448106 Go Tribe
Go Tribe's picture

That guy is so fucked. He's betting against the Fed. There isn't any hyperinflation. It's just the opposite. Real assets tanking hard tonight.

Sun, 04/14/2013 - 22:00 | 3448119 Scarlett
Scarlett's picture

Excuse my asking, but since when is paper gold a Real Asset?

Mon, 04/15/2013 - 07:41 | 3449171 jvetter713
jvetter713's picture

Deflationary head-fake.

Sun, 04/14/2013 - 21:27 | 3448017 sysin3
sysin3's picture

Come on. That's not even a good attempt at English.

Sun, 04/14/2013 - 21:27 | 3448020 TahoeBilly2012
TahoeBilly2012's picture

JGB is for Jerry Garcia Band?

Mon, 04/15/2013 - 03:09 | 3448811 Martel
Martel's picture

JGB is for Jerry Garcia Band?

No, but LSD is for Long Slow Deflation.


Sun, 04/14/2013 - 21:30 | 3448029 abducens
abducens's picture

My new issue of Money mag has a whole article on how Japan is coming back and is the new HOT investmant.

Sun, 04/14/2013 - 21:36 | 3448044 otto skorzeny
otto skorzeny's picture

in a moment of sheer lunacy on my part I ordered that rag- now it goes straight to the hospital where my wife works without me even opening the cover

Mon, 04/15/2013 - 00:38 | 3448669 hmmtellmemore
hmmtellmemore's picture

Friday morning Barrons outdoes them once again:


Bitcoin for Your Thoughts? Buy Gold




Wow, broken record 'stackers' have a buddy at Barrons now!  Keep stacking!


Sun, 04/14/2013 - 21:35 | 3448040 LeisureSmith
LeisureSmith's picture

OT but.... Gold around 1480, Silver at 25.35 and falling. gold/silver ratio at 58+ Interesting times.

Sun, 04/14/2013 - 21:52 | 3448085 fonzannoon
fonzannoon's picture

This is like Christmas eve for me. What is going to suck is tomorrow when I find coal in my stocking because my dealer still wants $1575.

Sun, 04/14/2013 - 21:55 | 3448098 WmMcK
WmMcK's picture

If GSR gets above 59.07 I may have to swap.

LCS says he will NOT take FRN below $25 spot.

This is getting more unreal by the moment.

Sun, 04/14/2013 - 22:12 | 3448196 LeisureSmith
LeisureSmith's picture

Holy shit! My post got old fast.

Sun, 04/14/2013 - 21:38 | 3448047 Yen Cross
Yen Cross's picture

   EX Soros adviser?  F**k me naked.   I'm too busy trading . I'll  catch ya 'all in London.

Sun, 04/14/2013 - 21:45 | 3448065 lewy14
lewy14's picture

If he's talking up JGB vol, then that's what he must be selling.

If you can sell JGB vol you are probably killing it right now.

Sun, 04/14/2013 - 21:47 | 3448071 Yen Cross
Yen Cross's picture

 short (GBP) lol

Sun, 04/14/2013 - 22:13 | 3448191 lewy14
lewy14's picture

lol is the new vol (?!)

Sun, 04/14/2013 - 21:37 | 3448048 Ignatius
Ignatius's picture

Gold being down now makes perfect sense to me.

Thanks for clearing this up, Tyler.

Sun, 04/14/2013 - 21:46 | 3448073 otto skorzeny
otto skorzeny's picture

silver is down .50 in asia now.

Sun, 04/14/2013 - 21:51 | 3448084 LeisureSmith
LeisureSmith's picture

Cliff diving.... Gold and Silver down big. Watch out for falling knives.

Sun, 04/14/2013 - 21:52 | 3448086 ziggy59
ziggy59's picture

.95 now

Sun, 04/14/2013 - 21:44 | 3448067 StarTedStackin'
StarTedStackin''s picture

ummmm N(H)OPE, socialism is a complete sucess everywhere it's ever been tried!



I dare anyone to show me just one example of a socialist society that has failed......




yep. both parties are the same..........




That's why Bush did QE 1- Infinity too, just like the OBowel Movement is doing.

Sun, 04/14/2013 - 21:50 | 3448080 fonzannoon
fonzannoon's picture

I truly wonder if a flood of Japanese money flooding into the U.S can give Bernanke the cover he needs to exit QE temporarily and back up the assertion that "see! we can stop qe anytime we want, and the market does not react". Even if he slows down the pace of buying for a bit. What a nice charity hop for him if it works.

Sun, 04/14/2013 - 21:51 | 3448082 Yen Cross
Yen Cross's picture

 I have a 75 pip stop on usd/jpy. I'm, looking to short the ponzi euro.

Sun, 04/14/2013 - 21:57 | 3448102 fonzannoon
fonzannoon's picture

I wonder if silver will break into the $24's tonight? What happened to the imminent silver short squeeze? I guess that is over. This is like being on a rowboat with your half mentally retared cousin and he starts rocking the boat back and forth and you start trying to grab onto anything you can because this crazy asshole is going to rock the boat until you both fall off. The only thing you can do is take the oar and knock him unconscious because that is the last thing he expected.

Sun, 04/14/2013 - 22:06 | 3448155 Mine Is Bigger
Mine Is Bigger's picture

It already has.  And it is heading straight toward $23's.

Sun, 04/14/2013 - 22:09 | 3448164 Yen Cross
Yen Cross's picture

  Buy silver/ Buy usd/

Sun, 04/14/2013 - 22:11 | 3448188 WmMcK
WmMcK's picture

We may go full retard here shortly and you never want to do that.

Sun, 04/14/2013 - 22:15 | 3448205 akak
akak's picture

Shit, we've gone long past full retard already, and are now into anencephalic territory.

Sun, 04/14/2013 - 22:25 | 3448257 Yen Cross
Yen Cross's picture

  anaphylactic shock/   

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