ALERT -Japan's Bonds Risk Default; Sakakibara

Failure to up sales tax risks crash of JGBs: Sakakibara

 

 

Bloomberg News

 

The government should prioritize expanding its recent sales tax increase or risk an eventual collapse of sovereign bonds, former Finance Ministry official Eisuke Sakakibara said.

 

 

 

A failure to raise the consumption levy “could trigger massive dumping” of the nation’s debt, Sakakibara said in an interview in Tokyo last week. “We must not derail from boosting the levy to 10 percent. The bond market’s collapse would be more dire than a tax increase.”

 

Prime Minister Shinzo Abe has indicated he will decide by the end of this year whether to go ahead with the sales tax increase to 10 percent in 2015, weighing the economic fallout of the 3-percentage-point gain to 8 percent this month. Gross domestic product may contract an annualized 3.3 percent in the second quarter, the sharpest drop since the first three months of 2011, according to a Bloomberg News poll of economists.

 

“Ten percent is still not enough” and Japan may have to eventually increase it toward 20 percent, in line with other developed nations, said Sakakibara, who is now a professor at Aoyama Gakuin University in Tokyo. “If we increase spending, we need to radically boost revenue.”

 

Economy minister Akira Amari said earlier this month the decision to hike the levy to 10 percent will not be easy. Sixty percent of respondents in a survey by Nikkei newspaper and TV Tokyo oppose the move, while 32 percent support it.

 

Domestic investors hold more than 90 percent of the government’s debt, which means the country is relying on the world’s fastest-aging population for financing. A quarter of Japanese will be over 65 years old by the end of 2014. That’s the highest ratio globally, according to U.S. census bureau figures compiled by Bloomberg.

 

 

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Lets not forget; QE Japan style

 

 

Does Evil Lurk In Greek Bonds?

Callaway: New 

Greek Bonds A Bad

 Sign

 David Callaway, USA Today

WASHINGTON D.C. — Forget tech stocks. Greek debt is the story of the week on Wall Street, proving once again that nobody can remember anything more than four years old.

Less than 50 months after Greece crashed out of global debt markets, having brought Europe and its single currency to the brink of destruction and shaken American investment portfolios to the core, the tiny sun-splashed nation was shamelessly back on the world stage Thursday. Greece raised more than $4 billion with a new bond sale, purchased almost entirely by investors outside the country and at a relatively low payback rate of 4.75%. Investors had pledged almost seven times that amount to try to get a piece of the offering, according to Bloomberg News, citing a Greek government official.

The search for profit is difficult right now for investors. Interest rates in the U.S. and other major countries remain low following the global financial crisis of 2008 and early 2009. Stocks, especially in tech in the last year, have pushed new highs, at least until the last week. But the rush to buy Greek debt again is a clear sign of the absurdity of the bull market as it begins its sixth year.

Spring is for dreamers. Baseball season begins. In Chicago, Cubs fans are happy. In Silicon Valley, teenagers are fielding offers of billions of dollars for products they haven't built yet. Here in Washington, D.C., the cherry blossoms are blooming, Congress is getting along, kind of, and the International Monetary Fund is staging its spring meeting with a rosy prediction of global growth in the coming year.

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Deep, Dark, Cold in China's Ghost Cities

This Chinese City’s Property Market Is Even Chillier Than Its -22-Degree Weather

 

Wall  Street Journal - China Real Time

Here in the frigid, wind-battered northeast Chinese port city of Yingkou, real-estate developer Zhang Wang is hoping that weather might be a selling point for potential apartment buyers.

Temperatures in the region plunge to -30 degrees Celsius (-22 Fahrenheit) in the winter. But in Yingkou, they bottom out at a mere -20 degrees, he says. Maybe he can get some buyers looking for a better climate.

Cities like Yingkou in China’s northeast rust belt were among the earliest cities in the country to be overbuilt. In 2005, now-Premier Li Keqiang was party secretary of Liaoning province, where Yingkou is located. He pushed a massive restructuring project to wean the region from its reliance on steel, coal and mining. 

As Mr. Li moved up the government ranks, developers counted on his endorsement as an implicit government backing of the region’s future development, developers and analysts say. Yingkou, along with other cities, sold vast tracts of lands to developers to build apartments for the workers who – they hoped –  would populate the new factories, malls and industrial parks to come.

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EU Positive - Greece Back In Markets

Greece returns to global markets

Four years after crisis, investors rush to place €11bn of orders for five-year bonds

Greece yesterday returned to global capital markets for the first time since the euro zone crisis erupted in 2010, attracting huge demand for its government bonds in a sign of growing investor confidence in Europe’s weakest economies.

Investors rushed to place €11 billion of orders for the five-year bonds, just four years after its debts triggered an international crisis that threatened to destroy the single currency and break up the euro zone.

Following a painful period of austerity and the biggest debt restructuring in history, Greece achieved a primary surplus in 2013. But with high levels of unemployment it remains the weakest link in the 15-year old currency union.

Fragility

As if to underline the fragility of Greece’s recovery, the country’s labour unions embarked on nationwide anti-austerity strike yesterday, forcing schools to close and bringing parts of the public transport network to a standstill. News of the debt sale was barely reported in Athens due to television blackouts.

The €11 billion order book, which is about four times higher than the amount Greece is expected to raise, includes about €1.3 billion from the banks arranging the deal. 

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And not that long ago...