Tito's Blog

USDJPY Conundrum

Yesterday the yen reached the postwar record high against the dollar.

Yet, Japan’s budget deficit is higher than tax revenues, before accounting for the recent tragedy. They are spending more than twice what they can afford, with the rest being borrowed or soon to be fully monetized by Japan Central Bank.

How suddenly the flight to safety into the yen will transform into a currency crisis will be shocking to most. A couple of interesting links from the FT: FT.com / Markets - Yen strength is likely to prove short-lived and Japan’s megabond tremors.

When A Government Uses Ads To Sell Its Bonds

When I see Berlusconi’s face on a commercial selling Italian Government Bonds, then I’ll start to really worry.

They are doing it in Japan (source Bloomberg, via Hayman Capital letter)!