Japan's ruling party for the past 50 years is set to lose the national elections tomorrow. The LDP (Liberal Democratic Party) have ruled Japan for the vast majority of time post-WWII. They are set to be replaced by the DPJ (Democratic Party of Japan) amid global economic depression and high unemployment (CNBS propaganda notwithstanding). What does this mean for America?
This is a complicated situation. The first important consideration is that the DPJ have been making nationalist/populist noises which may or may not be followed through. These include the possible loosening of controls on the Japanese military-industrial complex for export, which has been mostly prohibited since 1976. Japan has a massive arms industry with some of the most advanced equipment on Earth, which could be potentially destabilizing and infringe on US, Chinese, or Russian arms industry turf. What does this matter to you, finance nerd? Why economic collapse and war always come together. There are remarkable parallels here with the U.S. and Western Roman Empire.
Japan's Arms Industry Is Growing
Japanese SSM-1 Surface to Ship Missile System (Mitsubishi Heavy Industries)
Japan has $4.8bn yearly in international arms sales. They are ranked 5th globally and growing.
Japanese Robotic Fish. Yeah, pretty fail. Don't cut us off Japan! (Mitsubishi Heavy Industries)
So we can see here we have the potential for a 'guns and butter' economy in Japan, much like the U.S. at present. Picture swarms and swarms of the robotic fail fish, and you have a picture of the nightmare which may ensue should Mitsubishi's employment become a political issue. There is also the potential for a more independent Japan which enters a policy more favorable to domestic interests rather than U.S. interests. This here is the key.
Japan's Economic Policy and the DPJ
For those interested in a more complex analysis, it is suggested you visit our globalist paymasters at their Website here. They have provided the world sheep with an excellent analysis of this situation. However, the Japanese military-industrial complex is not our focus here -- despite the fact that JOSHUA is indeed still playing the game. Rather the key threat is a Japanese political realignment that results in fundemental economic policy changes. In this vein, the DPJ 's finance minister threatened in a little noticed article in May.
Japan's opposition party says it would refuse to buy American government bonds denominated in US dollars, if elected.
The chief finance spokesman of the Democratic Party of Japan, Masaharu Nakagawa, told the BBC he was worried about the future value of the dollar.
Japan has been a major buyer of US government bonds, helping the US finance its Federal budget deficits.
But, he added, it would continue to buy bonds only if they were denominated in yen - the so-called samurai bonds.
"If it's [in] yen, it's going to be all right," Mr Nakagawa said in an interview with the BBC World Service.
Indeed we can see that Japan is the U.S. second-largest creditor after China, so this is not trivial at all.
Could the new Japanese government demand payment in yen?
What many may not understand, as has been mentioned repeatedly at the excellent blog FOFOA, is that hyperinflation and deflation are closely related. Deflation and currency crisis are not mutually exclusive. This is precisely what happened in 2008 in Iceland. While the banking sector in Iceland was in tatters, resulting in bank runs, bankruptcies on a massive scale etc, the Icelandic Krona decreased by more than 50% against the U.S. dollar.
The issuance of any significant amount of credit in yuan, yen, or in PetroState currency is a key source of a possible death blow to the U.S. dollar. There are many possible death blows, and they grow by the day. Mish is fond of saying there has never been a hyperinflation in history where land values do not rise. On the contrary, it is our contention that a 50-90% reduction in U.S. dollar purchasing power constitutes 'currency crisis' rather than 'hyperinflation', semantics notwithstanding. Indeed M3 can contract while M0 and M1 expand. This appears the situation towards which the United States is heading. Incidentally -- this does not necessarily mean housing values rise -- simply that the dollar will fall by 50% or more on the international markets. This would cause immediate doubling in the prices of all essential items, such as food and fuel (as well as gold and oil). This situation is quite common in the third world, where labor and land costs are extraordinarily cheap, but prices of essential items are expensive.
The issuance of US bonds denominated in foreign currency is a key source of the potential 'grey swan' which will serve the United States a cutoff notice. Hedge your portfolio accordingly.