Has Japan Run Out Of Cans To Kick?

Tyler Durden's picture


Japan's Trade and Current Account imbalances appear to be hitting some kind of terminal velocity and while neither JGBs nor CDS seem to reflect the ensuing chaotic recognition that perhaps the can that has been so faithfully kicked down the "Nishi-no-michi" or the West Road may have plunged over the lip of Mount Fuji (conjuring images of Mordor), FX markets recent and abrupt weakness brought on by yet more printing (a topic we discussed in great detail recently as the chosen heretical method du decade) may well be coming face to face with reality. We assume Azumi is faithfully watching these market moves but we wonder at what point the quasi-intentional weakening of local currencies flares into a full-blown currency war - and instead of merely encouraging simpleton FX-carry strategies chasing momentum and leverage - quickly becomes the hyperinflationary super nova that many have been waiting for over the last decade. Dismal demographics aside, we wonder how long before Koo prescribes yet more of the same medicine for this constant state of deflation and at what point does inverted-Apple-looking charts for Trade and Current Account balances become simply too hot to handle...

The Japan trade balance has tipped into extreme freefall...


As has the Current Account balance...

And the absolute basis (purple line) between CDS and JGBs remains notably above any of its peers reflecting more of the possibility of a hyperinflationary or devaluation 'event' than Greece-like default given its currency-manufacturer status as opposed to its currency-user status (a la Greece)...

The basis (5Y 83bps) above is all the more shocking (almost triple the bond yield) when considered in relative terms - i.e. compared as a ratio to the extreme low yields of JGBs (5Y 29bps!! and 10Y charted below)...

so perhaps the recent 'crash' in USDJPY, catching up to FX vol risk-reversals (a measure of the FX options market's implicit skew to bullish or bearish sentiment) is the start of bigger things...


or is it simply yet another false alert on the road to Mordor for Japanese Central Bankers?

Charts: Bloomberg

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Fri, 03/09/2012 - 00:49 | 2238531 The trend is yo...
The trend is your friend's picture

land of the sinking sun

Fri, 03/09/2012 - 00:59 | 2238551 Harlequin001
Harlequin001's picture

Now this is serious. If Japan goes down, so does US/UK 24hr control of financial markets.

Oh dear...

Fri, 03/09/2012 - 01:53 | 2238640 Bringin It
Bringin It's picture

Now this is serious.

Not really.  Not yet. 

Won't BSB just set up some FX swaps and buy the Neiki?  Buy the JGB?  Buy Tepco?  Buy everything???

Fri, 03/09/2012 - 01:56 | 2238646 Harlequin001
Harlequin001's picture

They use Japan to move future markets on Sunday nights. Usually, when the US opens a trend is already in place. You'll remember Hanks Sunday night revelations in 2008, very telling...

Fri, 03/09/2012 - 05:21 | 2238949 Western
Western's picture

The Eastern front is about to get a whole lot more dicey.

Fri, 03/09/2012 - 06:42 | 2238996 Element
Element's picture

Another factor is that if the USD reserve status went down in a heap the US also loses the ability to continuously track and target funds in private accounts everywhere, and to 'freeze them' or confiscate them, it will lose its toadies, and also be less able to fin-fuck whole countries and individuals.

Thus providing another excellent rationale for states to collaborate to delouse themselves of USD and geopolitical (i.e. Washington) exposure.  USSA's constant, habitual and ever-amplifying meddling in other countries internal affairs and inciting conflicts is more than fair cause to rid the world of USD.

Fri, 03/09/2012 - 07:09 | 2239015 GetZeeGold
GetZeeGold's picture



Sooooo.....basically what you're saying is we've got plenty of cans.....we're just out of road.



Fri, 03/09/2012 - 07:24 | 2239033 Harlequin001
Harlequin001's picture

No, basically we have one can, cos we can't afford any more, and no more room to kick it.

Fri, 03/09/2012 - 08:38 | 2239119 Thamesford
Thamesford's picture

I think its more like the French "Can-Can". You sort of kick in the air at an imaginary can and try to impress everyone by lifting your skirt.

Fri, 03/09/2012 - 11:21 | 2239553 Harlequin001
Harlequin001's picture

No offence but I'd kind of figured that one out already...

Fri, 03/09/2012 - 20:54 | 2241987 Tompooz
Tompooz's picture

Yea. Good news for New Zealand. 

Fri, 03/09/2012 - 01:00 | 2238553 Manthong
Manthong's picture



So where will the shit hit the fan?

Will it come from Athens or Tehran?

Madrid, Lisbon or Rome?

Or from Ben here at home?

I’m with Kyle, keep an eye on Japan

Fri, 03/09/2012 - 01:22 | 2238595 DeadFred
DeadFred's picture

The tsunami destabilized Japan and looks like their house of cards will tumble. Japan will destabilize the house of cards that is ZIRP. What will happen if/when the Fed cannot dictate interest rates? This is the problem with central planning, even teams of people with 1000 IQs can't plan for everything.

Fri, 03/09/2012 - 01:55 | 2238645 Harlequin001
Harlequin001's picture

Yes we can...

Fri, 03/09/2012 - 09:48 | 2239267 JPM Hater001
JPM Hater001's picture

Yeah, me and Harlequin001 do it all the time.  Course his IQ is only 980 but we let him in the club anyway.

Charity work.

Fri, 03/09/2012 - 11:20 | 2239481 Harlequin001
Harlequin001's picture

it is if you divide it by two...

I only found out two months ago that an IQ score is not like a golf handicap at all. I used to think I was totaly and utterly stupid, but now I realise I'm actually a certifiable fucking genius.

Howzat for pure blind luck..

Fri, 03/09/2012 - 14:57 | 2240507 matrix2012
matrix2012's picture

Read James Stone's Fukushima hypothesis on how the Magna BSP's security cameras were the culprit. Stuxnet did participate there as well, took out not only the plutonium enrichment facility but down with it the Japan's already ailing economy!

Fri, 03/09/2012 - 02:57 | 2238815 ChrisFromMorningside
ChrisFromMorningside's picture

All of them. At once.

Fri, 03/09/2012 - 09:49 | 2239270 JPM Hater001
JPM Hater001's picture

Yeah.  This feels like I'm bowling and the pinsetter is getting it ready.

Fri, 03/09/2012 - 05:40 | 2238960 Likstane
Likstane's picture


Fri, 03/09/2012 - 05:40 | 2238961 Likstane
Likstane's picture

You might wanna leave the limericks to the King.  Haiku maybe?

Fri, 03/09/2012 - 01:05 | 2238558 The trend is yo...
The trend is your friend's picture

When Japan's Financial system blows it's gonna make hiroshima look like a firecraker

Fri, 03/09/2012 - 07:19 | 2239027 GetZeeGold
GetZeeGold's picture



The PC crowd.....is not going to be pleased with that statement


Oh well.........fukem.



Fri, 03/09/2012 - 01:23 | 2238597 DoChenRollingBearing
DoChenRollingBearing's picture

They make good bearings though.

Fri, 03/09/2012 - 01:58 | 2238649 Harlequin001
Harlequin001's picture

Let me guess, you make bearings in Japan?..

Fri, 03/09/2012 - 07:49 | 2239061 LongSoupLine
LongSoupLine's picture

Kyle Bass...nailed it, again. It will happen, and many will be thrown under the bus.

Fri, 03/09/2012 - 08:32 | 2239108 Thamesford
Thamesford's picture

Red Drain?

Fri, 03/09/2012 - 00:51 | 2238536 azusgm
azusgm's picture

The implosion will be epic. So much has hung on the carry trade.

Fri, 03/09/2012 - 01:05 | 2238559 DormRoom
DormRoom's picture

"Sterilized QE" coming to Japan?

Fri, 03/09/2012 - 01:09 | 2238566 CrockettAlmanac.com
CrockettAlmanac.com's picture

The area around Fukushima has been sterilized already.

Fri, 03/09/2012 - 00:54 | 2238538 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Is Japan going to keep playing the print money while someone buys your bonds or are they going old school Zimbabwe style, crank up the presses carelessly? Japan is running out of investors for their crappy bonds.

Fri, 03/09/2012 - 00:54 | 2238540 IAmNotMark
IAmNotMark's picture

Man!!!  What part of this friggin world ISN"T on the edge of a cliff.  Or already over the edge?

I know, I know.  Antartica.  And maybe ... I just looked at Google Earth...nope!  Every other friggin part of this world is screwed.

Fri, 03/09/2012 - 01:42 | 2238627 azusgm
azusgm's picture

Maybe Venezuela? Chavez repatriated their gold.

So, oil and gold. Nice combination as long as they have food, water, and the means to protect their assets,

Fri, 03/09/2012 - 02:02 | 2238654 oldman
oldman's picture

The poles are melting down

get the boats out

Fukushima is the big deal-----no much how much noise these markets make

poles melting-----radiation will not be denied----synergetic?

we'll see in time, but keep stacking those metals down in the hole

at least it helps pass the time

oh, shit-------what happens if we have nuclear war?

Man, this is fun---never thought I'd live to see a show like this

never imagined I'd be in the show----so lucky to be here with all of you     thanks    om

Fri, 03/09/2012 - 03:16 | 2238840 NorthPole
NorthPole's picture

A country very rich in natural resources and with as-of-yet unspoiled populace is still chugging along quite nicely: Indonesia.

Fri, 03/09/2012 - 00:55 | 2238545 Sylvia Plath
Sylvia Plath's picture

Japan's more screwed than America! At least they know how to cove it up!!!

Fri, 03/09/2012 - 02:59 | 2238817 ChrisFromMorningside
ChrisFromMorningside's picture

No, because in a financial collapse the Japanese population won't tear itself apart violently. The U.S. population will.

Fri, 03/09/2012 - 11:11 | 2239512 CvlDobd
CvlDobd's picture

I watched two shows last night. One on 9/11 and one on the Tsunami last year. In NY people on the ground were stampeding to get out of the path of destruction. Very logical IMO.

In Japan they were barely jogging while this massive wall of water and debris was bearing down on them. I was thinking, what the hell is wrong with these people. Some of them are 100 feet from a safe hill and 300 feet from certain death and thy still won't fuckig run as if it is improper or something. It was very strange to see.

Fri, 03/09/2012 - 01:00 | 2238546 Yen Cross
Yen Cross's picture

 Japan is desperate. They are invoking VAT taxes, and trying speed up the transistion schedule. Their working class is aging  from 2 decades of deflation. They are being torn apart from Asian counterparts : Korea , China, India.  Japan has very limited natural resources.

    Japan is an albatross, for the Americas. They went apeshit in the 80-90's and destroyed the ( commercial), real estate market in the United States. If any one should have Nukes, it should be Japan! Let Japan deal with China.

  2 Milleniums of torture, should suffice!

Fri, 03/09/2012 - 02:03 | 2238655 Harlequin001
Harlequin001's picture

Yep, Japan's been pretty good at starting wars in the past...

Fri, 03/09/2012 - 02:14 | 2238686 Yen Cross
Yen Cross's picture

Both of my Grandfathers fought in it!

Fri, 03/09/2012 - 11:49 | 2239665 Harlequin001
Harlequin001's picture

Did they win?

Fri, 03/09/2012 - 06:44 | 2238998 Element
Element's picture

And as we know VAT is a regressive tax.

Demand is hardly going to go up, nor deficits down.

Fri, 03/09/2012 - 07:51 | 2239063 LongSoupLine
LongSoupLine's picture

Yep, just ask any good German about VAT...

Sat, 03/10/2012 - 15:05 | 2243397 matrix2012
matrix2012's picture

Did either one of them fought in Nanjing (1937) too?



What is often ignored in Western education curriculum, and unknown to Western society in general, is the fact that War in Asia had already erupted by 1937 with the Japanese invasion of China and the subsequent takeover of the then capital city of Nanjing, 4 entire years before the attack on Pearl Harbor in 1941. Japanese expansionism had already begun by the early 1930s with the occupation of the northeastern part of China and the establishment of the puppet state of Manchukuo. Full scare war between the Empire of Japan and the Republic of China officially began by July 1937 following the Marco Polo Bridge Incident. By August of 1937, the Japanese launched a full scale assault on the city of Shanghai. They were met with heavy resistance from the Chinese Nationalist army but eventually captured the city after weeks of brutal fighting. By then, the then-leader of China, Chiang Kai Shek, knew that the Japanese’s eventual target would be Nanjing. Knowing that the city would be lost, Chiang Kai Shek pulled out and relocated his government to Wuhan and later Chongqing. He left with most of the Nationalist army in preparation for future battles, leaving only a small, disorganized and greatly undersupplied battalion of soldiers left to defend Nanking. The Japanese slowly made their way to Nanjing after the fall of Shanghai.

The Japanese arrived outside the city walls on December 8, 1937. After 5 days of fighting with the remaining Nationalist army, the wall was breached. The Chinese army remaining in Nanjing were vastly outnumbered and outmatched by the superior Japanese forces and weaponry. After the city fell on December 13, 1937, the Chinese army surrendered their weapons and hoped to be treated with mercy by the occupying Japanese forces. They couldn’t have been more wrong. The events that followed later became known in history as the Nanjing Massacre.


Full story is hereThe Tears of Nanjing


Fri, 03/09/2012 - 00:56 | 2238547 the 300000000th...
the 300000000th percent's picture

Kyle Bass called it again


Fri, 03/09/2012 - 01:04 | 2238556 Zgangsta
Zgangsta's picture

And while you're fearmongering, the Nikkei is about to break 10,000.  Game over.  Ponzi FTW, bitchez!

Fri, 03/09/2012 - 01:12 | 2238570 Yen Cross
Yen Cross's picture

 OOOHHHHH 10K Nikkei! Me so impressed. Did you see the DAX yesterday Ass hole ?

Fri, 03/09/2012 - 01:47 | 2238633 Yen Cross
Yen Cross's picture

Y I know your Father! Z

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