Sunday, February 17, 2013

Japan's Current Account Moves Negative & GDP Continues To Contract

This week we received word that the fourth quarter GDP out of Japan was once again negative, coming in at -.4% on expectations of positive growth. Japan has now been in contraction for 3 straight quarters.

Perhaps their new stimulus and QE programs can bring a temporary surge in the GDP levels for the first quarter of 2013, we will know when the data is released.

Of even more concern, are the actual capital flows as the country moves toward its government debt implosion. The entire current account has now run negative for two straight months. This essentially means that total capital flow is now exiting Japan's borders at a time they need capital more than ever. The following graph shows the monthly current account declines in November and December.


Kyle Bass said a few months back that he did not anticipate the current account moving completely negative until the third quarter of 2013. A complete collapse in Japan's exports has pushed this important capital shift of total capital flow out of Japan to present day.

The stage is now set perfectly for the first tremor to arrive in their bond market. This comes at a time when the government is running and creating new spending programs to artificially boost the economy. It comes at a time when their central bank is now running and creating new QE programs to artificially boost the economy.

For a further discussion on Japan, the following is a recent interview with Bass at the GAIM conference where he sees the Japanese Yen rising to 200 against the dollar and most Japanese citizens losing the majority of their wealth.

"We think their rates will move uncontrollably once the yen really starts to move."

"The social fabric of the country will be torn."

For much more on this topic see:

2013 Outlook: Japan's Government Debt Bomb Goes Off



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