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Japan hints at economic action in S Korea isle feud

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Will Japan implement the same approach with China?

QED.

-1 ( +4 / -5 )

And at the same time while seeing the thousands of masses of Chinese protest over the recent island visit by activists the Japanese government calling for calm and that the dispute should not affect the economies of the two nations.

0 ( +4 / -4 )

"The islands, known as Dokdo in Korea and Takeshima in Japan, lie equidistant from the two mainlands and are believed to contain (frozen natural gas deposits) potentially worth billions of dollars." These gases are called methane hydrates. It's seldom mentioned in the Japanese media.

5 ( +6 / -1 )

More hollow threats.

0 ( +4 / -4 )

Japan already affect the economies between Japan and China, Japan and Korea, & Japan and Russia. What are they going to do?

0 ( +3 / -3 )

Dumb idea.

-2 ( +4 / -6 )

Lets stop importing those Samsung, LG, Hyundai products.

5 ( +15 / -10 )

Let's just ban K-Pop !

12 ( +15 / -3 )

since south korea (南朝鮮) hasn't made any overtures toward sharing the resources to which both countries have a reasonable upon which to stake their respective and mutual claims, it's time to give them the cold shoulder, so to speak.

6 ( +9 / -3 )

This stupid spats, well are not good for anybody, except the mass media??

-7 ( +3 / -10 )

Japan hints at economic action in S Korea isle feud...........................

right on and while you are at it, remove all investments in China or whatever nations that have dispute with you.

Teach them a lesson not to mess with Japan. Watch their economy tanks and they will come begging ( with better manners , this time )

-5 ( +3 / -8 )

extending the stand-off into the economic arena

Japan doesn't understand the severity of any economic struggle. The Koreans are serious about this, and they could completely cut off the supply of any decent kimchee, for Pete's sake! We just can't risk it...

2 ( +2 / -0 )

This type of international economic/political tit for tat is a slippery slope. Though these reindeer games may work in Nagatacho, it is unlikely anything positive will come from such actions in the international arena. I fear Japan is greatly overestimating its own geopolitical position in the 21st Century...

5 ( +6 / -1 )

I fear Japan is greatly overestimating its own geopolitical position in the 21st Century..

I'm not so sure about that. I think Japan can afford whatever economic retaliation South Korea can dish out, but really, there is no sense stooping to this level. It's juvenile, and since it will feed nationalism in Korea, it's not really effective as a method of persuasion or as a punishment.

6 ( +7 / -1 )

Oberst, I think you have it mixed up. Japan would tank - more so thank now- if they tried this with China. Korea? Fine. China? No way. China doesn't really need Japan. Japan does need China.

Perhaps all of them could grow up and discuss it like adults?

0 ( +3 / -3 )

The amount real swap that Japan has Korea currently = $0.00

The amount of real bonds that Japan has bought from Korea = 0.6% of the entire S.Korean bonds.

The real amount of economic influence Japan has on S.Korea = 0.

Japan can try, but all it will do is make them look like idiots, and it will only isolate Japan from rest of Asia when everyone else is cooperating with each other to deal with the European financial crisis.

0 ( +4 / -4 )

Read the July 2012 report on external financial risk of all the countries by the IMF. Japan is seriously exposed and in danger, and like their Yen, they are overestimating themselves.

<www.imf.org/external/np/pp/eng/2012/070212.pdf>

0 ( +5 / -5 )

What exactly was Japan suppose to get out of all this currency swapping anyway? I see no benefit to Japan in holding a weak depreciating currency. When the currency swap transaction is unwound, Japan would be on the losing end. This was a bad idea from the get go.

0 ( +0 / -0 )

This is so Japanese! Even my ex-wife extorts money from me to see my kids. Yet, they still expect the disadvantaged party to remain civil. Japan is in a spat with three of its neighbors over territories. Do you actually believe this is because Japan owns them? Or, is it because Japan took them during their imperialistic rampage over the last two hundred years or so? If these three countries (China, Sth Korea and Russia) band together they will swat this little island. I think Japan needs to consider their actions very carefully or they are gonna P-off the big boys in the playground and get a good thumping. Oh, and don't worry about the Sth Korean military. There are no slouches either. Japan has to remember that their neighbors still hate them and they shouldn't be making waves or the next tsunami could have tanks in it.

2 ( +7 / -5 )

What they should do (Japan, Korea and China) is to declare the islands as natural reserves so nobody will have the resources. As they will never accept that the other(s) get them any way, this is the best solution: no fighting, nobody lose face at least not as much as giving way to the "enemy" and the islands and waters around are preserved for the future generation. To be sure that no country take advantage over the others, the preserves will be placed under the administration of a neutral ecological organisation that is used to do this kind of job (I cannot name it ..I work for it ;-) Ok there are a lot of problem to work around and some warmongers and right wingers will not be happy about it but it is a small price to avoid war.

then I wake up..just a dream...ww3 has begun

0 ( +0 / -0 )

Economically, sanction will have little impact on S Korea as its economy isn't that dependent on Japan.

Politically, it will have zero impact on S Korea and the one getting hurt will actually be Japan which already have near zero political influence in east Asia.

0 ( +3 / -3 )

By the way, Japan's claim over those islets is clearly a violation of the Potsdam Agreement, the primary peace treaty or instrument of peace that enabled the ending of WWII that was agreed between US, UK, China, Russia and Japan.

The Potsdam Agreement states that:

"The terms of the Cairo Declaration shall be carried out and Japanese sovereignty shall be limited to the islands of Honshu, Hokkaido, Kyushu, Shikoku and such minor islands as we determine."

Since Japan agreed with Potsdam Agreement and surrendered in WWII, so it also lost its sovereignty over those islands including the Dokdo it colonized before WWII.

0 ( +3 / -3 )

Let's look at the merits of this swap. The swap promise was done last year, autumn to minimize the risk of European financial crisis on Asia. So the three countries of S.Korea, Japan, and China got together and promised to buy each other's currency and invest in each other. Now Japan wants to break this coalition because many Japanese for some reason mistakingly believe Japan has given Korea $70 billion in economic aid, when no cash has yet been traded.

If Japan stops the swap promise, I predict there maybe some waves made in Korean currency for couple of days then everything will be forgotten. But if for remote possibility that the Korean currency tanks as Japanese are hoping this will happen, then yes it will hurt Korea, but it will also hurt Japan. Just look at what happened after 1997 and 2008 when the Korean Won went down in value. They only made Korea stronger at the expense of taking away foreign market share from Japan.

Japan, de-invested itself from Korea long ago, they have few cards to play with.

-2 ( +2 / -4 )

Japan should stop hinting what it might do. Korea won't get scared so easily. Quick action by Japan is the way to go. No hints, no threats, no warnings.

0 ( +6 / -6 )

smithinjapanAug. 21, 2012 - 05:39PM JST And at the same time while seeing the thousands of masses of Chinese protest over the recent island visit by activists >the Japanese government calling for calm and that the dispute should not affect the economies of the two nations.

For all their differences, economically China and Japan value each other. Sorry to hurt your pride but South Korea is simply not in that league.

0 ( +2 / -2 )

Japan had better be damned careful here, already they have pissed off China & Korea & Russia is watching........

Japan sorry to say but your influence has/is waning quickly, sorry your neighbours arent likely to wince at your economic moves, but you had better be careful NOT TO PISS OF THE YANKS! Because Japan may very well put Uncle Sams military in harms way if these idiots keep up their stupid ways, the US wont look kindly on this if it starts getting any more STUPID!

Craig D you are spot on!

1 ( +5 / -4 )

OssanAmerica,

listen to the Japanese finance minister Masushida Tatahiro's comments he made. Japan's already buckling and is back peddling. Japan says to Korea "let's think talk about this calmly". I predict nothing will be done by Japan. Koreans here are just bemused.

-2 ( +2 / -4 )

chucky3176Aug. 22, 2012 - 12:31AM JST OssanAmerica, listen to the Japanese finance minister Masushida Tatahiro's comments he made. Japan's already buckling and is back >peddling. Japan says to Korea "let's think talk about this calmly". I predict nothing will be done by Japan. Koreans here are >just bemused.

I'm stll waiting for your substatiation of your claim that in 1965 Japan agreed not to take the island issue to the ICJ. Until then I dont really value your predictions or comments at all. I'm sure you understand.

0 ( +3 / -3 )

OssanAmerica, it doesn't take much to look up the 1965 treaty. Anyway, that's not what this topic is about. Please stick to the topic. I still say Japan won't do anything meaningful. How about you?

-2 ( +3 / -5 )

Read the July 2012 report on external financial risk of all the countries by the IMF. Japan is seriously exposed and in danger, and like their Yen, they are overestimating themselves

Gee. Skimmed through it. It's a report about "Global External Imbalances" (i.e. countries with surplus vs countries with deficits). I believe they mentioned the word "Korea" once in this report lumping them with other nations. Don't know how you came up with the conclusion based on that report though. But one thing I have to say, it's no wonder IMF basically encouraged Bank of Japan to dump it's Yen while Japan was ciriticized the EU Central Bank and U.S. for doing this.

Let's look at the merits of this swap. The swap promise was done last year, autumn to minimize the risk of European financial crisis on Asia.

More like. The swap increase amount to KOREA was done last year, autumn to minimize the risk of Korean collapse due to the European financial crisis.

How soon Korea forgets in that in October of 2008, the KRW went as low as 1,500 KrW/USD despite the fact the Korean central bank guaranteed to the private banks and corporations that USD would be procured. As the below article indicates, the government even restricted the outflow of funds to overseas.

http://japanese.joins.com/article/j_article.php?aid=105876

Of course, this resulted in an emergency rescue package where basically U.S. and China would execute the following swap agreements as well as Japan increasing the swap amount.

U.S./Korea swap-$30 billion USD (expiration 6 months which expired in 2009 after another 6 months renewal)

China/Korea Swap-Worth approx $30 billion (KRW-RMB swap with a three year expiration.)

Japan/Korea Swap of 2005 (Yen-KRW) was increased to from $3 billion to $20 billion.

Despite these measures, KRW again experienced a another crisis in February of 2009 where it reached 1,500 KRW/Yen levels.

In 2011, due to the European Financial Crisis the following agreements were agreed between Japan and Korea

Japan/KRW USD swap totaling $30 billion. Japan/KRW Yen swap worth totalling $30 billion. Additional $10 billion under Chiang Mai Initiative (MOF and Bank of Korea) which total $70 billion of which $57 billion will expire October of this year.

Does Japan have an "obligation" to extend this package ($57 billion)? No. Since not only the Korea media and people like Chucky are saying that they don't need it, it offers very little benefit to extend themselves like that when it's basically common knowledge that the party that benefits the MOST is the one receiving the hard currency while the other party is holding on to a piece of paper that may not be worth the paper you wipe your a$$ with.

So let's get back to your comment again.

"Let's look at the merits of this swap. The swap promise was done last year, autumn to minimize the risk of European financial crisis on Asia. "

Asia already has this in a form called Chiang Mai Initiative. As above shows, THIS ALONE was not enough for Korea despite the fact that Korea in Jan of 2008 had a comfortable foreign reserve of $262 billion. History shows time and time again that Korean currency has tanked. There is nothing "remote" about the prospects of this repeating again.

What you fail to understand chucky is it's not the actual "use" (drawing out or lack of it) of it from the swap that stabilizes the your KRW. What's keeping KRW from falling despite numerous gloomy economic outlook is that among the investors, companies, and individuals within Korea and abroad who deals with Korea are assured that there will be adequate foreign funds for now and the future financial transactions because they know countries like Japan and China are behind it.

2 ( +5 / -3 )

On the chapter of economic issues, this is definitely not the priority of Japan to further destroy the fragile base on which people longed for a soonest recovery in N. Asia amid global downturns. What north Asians need is to rebuild the drives & momentum to support growth. The last thing most average J citizens need is more confrontations ( especially economic sectors ) that results in threatening their job security & tranquil life style.

The PM's think tanks are rolling out non-exhaustive list of measures covering every aspects meant to 'bully' S. Korea will be used as revenge by them towards Japan that in turn hurts the average salarymen in both countries.

2 ( +2 / -0 )

Japan hints at economic action in S Korea isle feud

Again with an inaccurate title.

It's more like "Japan hints at economic inaction" for the swap agreement has an expiration which they'll let it expire and the non purchase of bonds for there is no obligation to buy.

0 ( +3 / -3 )

nigelboy, S.Korea has now $400 billion in the coffer which includes $315 billion foreign reserves, Chiang mai, swap with China, and without Japan's swap.

just ignore your predictions of an economic doom for Korea for a minute. Ask yourself this question. If S.Korea, as you say, collapse due to Japan's ending of the swap line, do you think that's going to be good for Japan or not?

0 ( +4 / -4 )

Korea needs to have been much more diplomatic on this issue.

Good relations with Japan should have a fairly high priority, and since both countries have viable claims to this contested small island, the least that Korea could have done was to agree to share the undersea resources.

Sorry, but Korea has demonstrated nothing but ill will of late.

0 ( +4 / -4 )

What did I tell you?

Japan reconsiders the swap ending tough talk.

http://www.bloomberg.com/news/2012-08-17/japan-s-korea-currency-swap-deal-put-at-risk-by-island-squabble.html

"They are talking about it but I am not sure they will carry through the threats. Talk is cheap," said Koichi Nakano, Sophia University professor and political commentator.

Japan's ruling Democrats, under voter pressure and likely to lose the next election, seemed to have over reacted to media criticism that they were too soft in disputes with Japan's neighbors, said Nakano.

http://articles.chicagotribune.com/2012-08-21/news/sns-rt-us-japan-koreabre87k06h-20120820_1_takeshima-senkaku-diaoyu

Talk is cheap, nigelboy, talk is cheap.

-2 ( +1 / -3 )

nigelboy, S.Korea has now $400 billion in the coffer which includes $315 billion foreign reserves, Chiang mai, swap with China, and without Japan's swap.

What does this number supposed to tell me? Your country had $262 billion in foreign reserves in Jan. of 2008 and yet you still needed three swap agreements to save the currency from collapsing. The article I linked to also mentions that despite Bank of Korea PLEADING that their foreign currency supply is abundant and that they'll guarantee the amount, the private companies ran like cockroaches in a flashlight. To them, the word of Bank of Korea means squat.

just ignore your predictions of an economic doom for Korea for a minute. Ask yourself this question. If S.Korea, as you say, collapse due to Japan's ending of the swap line, do you think that's going to be good for Japan or not?

Just to be clear, I'm not predicting an immediate KrW sell off right after Japan decides not to extend. It's how the market is going to react when there is a down turn on the outlook which was the trigger for the 2008 currency crisis.

As to answer your question, there is absolutely nothing positive that comes of collapse of a trading partner, period. And I have no doubt that when this happens, Korea will beg Japan to help and they will of course oblige. But what I get tired is this repetitive ungrateful after the fact comments from people like you which questions me of why Japan should do this AGAIN. (Please help us--->Didn't help us fast enough-->Didn't need your help--->It helped Japan more than it helps us garbage, circa 1997 and 2008 crisis)

2 ( +5 / -3 )

lol, where you getting this that Japan helped Korea in 1997? They didn't help, they pulled all their money out of Korea. lol... 2008? I do give credit to the US in 2008 though, who swapped with Korea for $30 billion which stabilized the Korean Won - it gave assurance to the investors that the US will be there for Korea if need be. That's putting water when the fire is burning down the house. Japan did the currency swap - right after Korea did one with US and China, which by then, the Korean currency was already stable. You're not going to take credit for what the US has done for Korea. I keep hearing that Koreans will come begging the Japanese. Such a wishful thinking.

0 ( +3 / -3 )

Japan needs South Korean & Chinese money or they will lose everything.

0 ( +3 / -3 )

lol, where you getting this that Japan helped Korea in 1997? blah blah blah

Gee chucky. Your response was so unpredictable (sarcasm)

IMF $58 billion package include bilateral funding commitment from Japan at $10 billion. Let's not forget that Japan is one of the largest contributors for IMF , World Bank and ADB. Even before that Korea was facing a $32 billion short term debt oustanding that was coming to maturity in which $12 billion was from Japanese banks. Of course, they restructured it as opposed of calling the debt. After IMF package, it also included the New Miyazawa Initiative, which included an untied loan of $2.3 billion and a $1 billion two step loan to Korean companies.

It's really sad when these packages were given to other SE asian countries at that time, they show no hesitation in showing their appreciation. Then again, isn't this what normal country with normal people do??

Please help us--->Didn't help us fast enough-->Didn't need your help--->It helped Japan more than it helped us, once again.

2 ( +6 / -4 )

"Perhaps all of them could grow up and discuss it like adults?"

Doesn't seem like that's possible unfortunately. But people have to start thinking outside the box.

Looking up Wikipedia there are dozens of territorial disputes all over the world - Even between Canada and the US. The only people not fighting over land are the Aussies. If only everyone could be as laid back, peace-loving and mature as the friendly people Down Under....

We should just referee one gala day of two-up matches and solve everyone's problems (and make some money on the side).

0 ( +0 / -0 )

nigelboy, I might as well figured you were talking about the IMF, in 1997. Japan was part of the multinational organization donors which used the funds available to bail out Korea, Indonesia, and Thailand. But before all this happened, Korea went to Japan twice for Japanese bank help for Korea. Both times, Japan refused help. Guess why? Because Japan's goal was to force Korea to beg the IMF, which was the last resort - sort of like the dreaded loan shark who preys on the desperate that everyone tries to stay away from. IMF's goal was to control Korea's economic policies, dismantle the Korean conglomerates, then buy all the assets on the cheap. None of the actual funds used (about $23 billion used out of $58 billion pledged) were given to Korea. Instead they were used to bail out the American and Japanese investors.

http://www.twnside.org.sg/title/mich-cn.htm

How the IMF help create and worsened the Asian financial crisis in the 1990's.

http://www.essentialaction.org/imf/asia.htm

-3 ( +1 / -4 )

Gee Chucky

Desperate enough to pull a paper out of organization that most likely protest G8 meetings and occupy Wall street.

I'll make it simple for you. Korean Private banks had an outstanding short term debt due to private banks(Japan, U.S., EU). The Korean banks couldn't meet this obligation so they asked for intervention which included restructuring of the current short term debt due oustanding to extend. Of course, thanks to the banks of each country getting together they obliged. But that only delays the inevitable since none of those banks would offer additional credit (understandably so for would you give a guy who owes you $100, saids he can'pay, another $100?) since there was no sign that the situation will improve. IMF comes in for they are the last resort to offer funding to pay off the outstanding debt. In turn, like most banks that restructure, there are going to be "covenants" involved (restrictions/modfications/corporate reforms) because without them, you are bound to repeat the same mistake again and no foreign banks would even consider continuing the credit transaction with Korea. Once the covenants were in place, and some of the funds disbursed, this allowed prviate banks to have enough confidence to let Korean companies/banks borrow from foreign private banks once again which in turn, lead to a fast repayment. (This I give Korea credit "non pun intended")

3 ( +4 / -1 )

The minute Japan blocks K-pop acts from Japan they will cave and beg to give Japan the Islands.

Korea needs Japanese help, Japan does not need Korea.

-1 ( +1 / -2 )

make ROK pay back their loans with interest!!!

-1 ( +0 / -1 )

chucky3176Aug. 22, 2012 - 01:40AM JST

nigelboy, S.Korea has now $400 billion in the coffer which includes $315 billion foreign reserves, Chiang mai, swap with China, and without Japan's swap.

Chucky, just do what most of us do on here and ignore Nigelboy.

The guy just makes the same outlandish claims time and time again with no credibility. On Saturday he was arguing that China, Japan and the USA implemented an economic rescue package for the South Korean economy in 2008!!!

It was news to the rest of the world.... and as a source he came up with some Japanese article about a renegotiated currency swap agreement of that year between the 4 countries concerned, which had nothing to do with rescuing the Korean economy in 2008

-9 ( +0 / -9 )

Sorry Dog

Even Chucky himself admitted that the October 2008 swap by U.S. saved them from currency downfall.

Need I remind you of the following

http://japanese.joins.com/article/575/117575.html?sectcode=A10&servcode=A00

Yoon Jeung-hyun, Ministry of Strategy and Finance in 2009

"韓国が最も厳しい時に外貨を融通してくれたのは、米中日の中で日本が最後だ"

"During our country MOST TROUBLED TIMES, the countries that loaned as the foreign currency were U.S., China, and Japan with Japan being the last to do so."

0 ( +2 / -2 )

nigelboyAug. 22, 2012 - 11:13AM JST

Sorry Dog, Even Chucky himself admitted that the October 2008 swap by U.S. saved them from currency downfall.

Only post to Nigelboy

The article is a highly subjective Japanese article with the usual Japanese claim of when helping itself, it's helping the world - 'the world needs Japan, but Japan doesn't need the world' syndrome. Please find us a non-japanese article that showed us there was a rescue package for the South Korean economy in 2008. It;s news to everyone else.

Again Yoon is talking about the 1997 South Korean economic crises, where China and the US pulled the strings behind the IMF scene to ensure that South Korea got the loans to redeem outstanding loan payments, even though initially the IMF did not want to lend South Korea the loans. Japan later joined the US and China, directly and indirectly in helping Korea... Again it was in 1997 not 2008.
-7 ( +1 / -8 )

1.The article is a highly subjective Japanese article

It's a Korean news source translated into Japanese by the source staff.

2.Again Yoon is talking about the 1997 South Korean economic crises

No he's not and even Chucky won't support you on this one because he has some basic knowledge of how 1997 crisis went down and it doesn't even come close to U.S./China helping out before Japan.

End of discussion.

2 ( +4 / -2 )

And just to add to all the bad politics, that annoying, egotistical (and 'aledgedly' less than truthful) Hashimoto from Osaka has announced publicly that there was no such thing as forced Korean "comfort women". This, not surprisingly, was not pickled up by the Japanese media - but was all over KBC Korean channels this morning. Probably he has announced this with spot on bad timing to deflect interest from his own recently disclosed domestic philandering, but in his usual selfish way he has further screwed up more important relationships.

2 ( +2 / -0 )

Being part of the IMF is not helping Korea. Korea is now playing a much bigger role in the IMF with bigger share of the donation, and the IMF just bailed out Ireland, Hungary, and Portugal. Did Korea willingly help those countries so that they stave off disaster?? Of course not! The Chiang Mai Initiative is the Asian version of the IMF because the IMF has been a freaking disaster, and the Asians got together to counter the Western bias. Remember folks, the IMF imposes all kinds of economic restrictions on a non-Western country, but when it comes to bailing themselves out, they go easy on themselves and go directly against everything what the IMF advocate. Just look at all the TARP money and Western bailout of the corrupt Western financial system during the 2008 world crisis. If Japan is going to end the swap with Korea, they should also withdraw from Chiang Mai as well. After all, according to nigelboy, Japan is part of these organizations because their true and only goal is to give economic aid to Korea, and not to further Japan's own economic interests. lol...

-3 ( +0 / -3 )

After all, according to nigelboy, Japan is part of these organizations because their true and only goal is to give economic aid to Korea, and not to further Japan's own economic interests. lol...

No. Chiang Mai Initiative is in place to insure currency stability among Asian nations. Japan doesn't mind giving that kind of support to SE nations who have shown appreciation in the past despite Korea's ungrateful actions.

0 ( +2 / -2 )

nigelboy, lol... come on... the Chiang Mai Initiative is a pool of money gathered from China, Korea, Japan + ASEAN. How in the world can you say this is Japanese aid money? My goodness... Same thing with the IMF fund. lol.. I hate to say this, but Japan's influence in the world has been tanking. Japan's not what it used to be, even up to the 1990's. Get used to it, Japan is increasingly becoming irrelevant, and by 2015, Japan itself may need a bailout when it can't fund its own debt and it has a funding shortage, and it has to borrow from abroad but with very high interests because no-one will lend to a country with a 250% debt level.

-2 ( +0 / -2 )

Chucky.

The whole point of CMI is to stabilitze each other nations currency where in some form of fashion backed by hard currency(which Japan has among the groups).

As to Japan's debt, this has already been discussed in another thread. The Japanese debt is financed internally(yen denominated owned by Japanese at 95%). This is something Korea dreams of ever achieving.

To make it simple, this is what's happening to Japan.

Japan is in a deflationary spiral where the domestic spending is slow. Hence, the Japanese Banks are carrying excess surplus of cash for they are not lending as much. Hence, the excess cash needs to go somewhere so the banks and insurance companies buys J Bonds despite the low interest rates. Well. Where is all this excess cash that bank has coming from? Answer: Majority of the cash are from people 60 or older who are receiving pensions/social security. In another words, the fiscal deficit that government is experiencing is caused by paying out to these 60 or older generations who instead of spending it on the economy, they're saving it to the banks who in turn have so much excess cash that they invest in JGB.

Hence, the chances of Japan even asking help from the IMF is slim to none.

If one asks, "what if the domestic population or banks don't buy JGB". Well. In that case, it means that the banks are lending and the people are spending on something else which in turn means more tax revenues which results in less reliance on JGB.

There is a reason why Japanese Yen is "safe haven" which is proven during the European financial crisis.

2 ( +3 / -1 )

nigelboy, I'm not going into detail on Japanese debt structure, but yes I do know Japanese debt is internal. What I'm saying though is the day is coming quickly when that will no longer be the case, and Japan will need a massive borrowing from abroad to make up for the shortage because they can no longer tap into their internal market. Both of Japan's trade and account surpluses are shrinking quickly. Japan's trade is a big minus deficit and getting worse. The account surplus is also in the same trajectory. Now add Japan's plans to eliminate trade with Korea completely (as others have pointed out to me), that's only going to make things worse for Japan. lol... but I digress.. this is the the topic to discuss all this.

"The whole point of CMI is to stabilitze each other nations currency where in some form of fashion backed by hard currency(which Japan has among the groups)."

That's exactly it. But you are contradicting yourself when you say Japan is helping out Korea with these types of funds. And I am pointing out your flaws in thinking.

-2 ( +0 / -2 )

Chucky. What you fail to understand is that there is no need to to tap outside sources simply because the situation is internal. The time JGB's interest goes up simply means the banks are lending and/or people are spending which means higher tax revenues in turn mean less reliance on JGB to finance the deficit. And let's not dismiss the fact Japan is the largest net external assets holder in the world for over 20 years, a large net creditor nation.

Whether you like it or not, Japan's trade/GDP is very low. In fact, the export/GDP is among the lowest of the developed countries. This is quite an opposite contrast from Korea which is by ratio comparison, export dependent.

As to the CMI, isn't Japan with their own hard currency as well abundant capacity to furnish other hard currency helping Korea who in the past had this problem recently?

0 ( +2 / -2 )

Japan is no longer generating the current account surplus it needs. Consumer demographics and low growth have pushed the consumer savings pool sharply lower — heading toward zero.

And Japanese companies have been using their savings pools to recover from falling demand for their exports. Therefore, the Japanese government is at risk of a dangerous funding shortage.

Here's why ...

Japan has a government debt-to-GDP ratio of around 215 percent. The interest cost to fund this debt is huge. Plus the yearly funding needed to maintain government services is massive. Add them up and you get a mismatch between government revenues and spending. It's called a budget deficit. And many countries in the West are familiar with this term.

Presently the yield on the benchmark 20-year Japanese government bond (JGB) is 1.7 percent. In fact it has hovered around this level since 1998.

If Japan does not have the internal funding available to handle its needs, it will have to look to international investors for this funding which would be much more expensive than what the current Japanese bond pays.

So Japan is faced with a triple-whammy of pain:

Rising funding needs, Falling internal sources of funding, Rising funding costs because foreign investors will expect a much higher yield than 1.7 percent to account for the risk of holding Japanese debt.

Because Japan is facing this triple-whammy with an already astronomical debt load, this mix of problems will likely lead to a vicious self-feeding spiral. Then higher interest rates will lead to higher funding costs and falling bond prices will lead to dumping of bonds, which leads to higher yields to entice new buyers.

I say it will eventually become a Japanese government bond default as the sovereign debt problems will be exposed when the foreign investors are done with European problems and they look more carefully at Japan's problems.

-2 ( +0 / -2 )

Don't mind me. I saved this as a word text, so that I can use this to post every time I encounter a claim that Japanese debt is internal so there's no problem.

-3 ( +0 / -3 )

Don't mind me. I saved this as a word text, so that I can use this to post every time I encounter a claim that Japanese debt is internal so there's no problem.

Why bother? It's not the first time people here screamed "sky is falling" on Japanese debt.

If Japan does not have the internal funding available to handle its needs, it will have to look to international investors for this funding which would be much more expensive than what the current Japanese bond pays.

As my above post indicates, "if" Japan does not have the internal funding available simply means domestic spending is up, commercial/consumer lending is up which in turn equals higher tax revenues, higher GDP figures which equals lower debt/GDP ratio. There is a reason why the domestic entities buy short/long term bonds (Interest rates between 0.1~1.8%) which was clearly explained above.

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