19 Comments

The stagnation thesis corresponds to the analysis of the JPY banking system by Richard Werner and his Princes of the Yen. He also argues that the dynamic of the last 30 years has been the cause of the political choice. But if we drift into a world with several economic zones, then the whole strategy has to come apart. It's being argued that Japan has not yet decided to whether join AUKUS formation or join SCO. The latter would be a better choice for economy, but the former is likely due to the fact that US has boots on the ground.

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Hi Russell, super interesting as always. I think it makes a lot of sense. China's rise gives them cover to reassert themselves I guess. To what extent is the question. At the end of the day, they have no "natural" reason to be such a staunch ally of the US (apart from the trauma of WWII like you point out); if they can use US distraction with China to play their own cards I don't see why they wouldn't. I'd think their demographics likely mean it wouldn't be too radical and quick though, would you agree?

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Isn't Abenomics an attempt to bolster Japanese economic strength to compete with a resurgent China? In that regard, it is an extension of US political aims.

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Great analysis, thanks.

I'm curious about your thoughts on the BoJ's yield curve control. Specifically:

-The sustainability of this rate suppression, given that the BoJ now owns over half of all JGBs.

-The impact it has on UST rates, as I suspect the BoJ's actions have been 'pulling down' treasury rates. 10 T-bonds are substantially below the FFR.

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Will Japan break the $ USD? Is the JGB the Berlin wall of fiat command economy?

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Very interesting, look forward to you next post. One question about your comment on the USD in 50,60s. Could you explain more deeply why the gold was leaving the US due to the USD being overvalued. I'm sure there is a simple macro answer that I am stumbling with. Thanks

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Very interesting. Stagnation but with a CA surplus. Now that the surplus is eroded the focus must/should be on rebuilding economic activity to have that surplus again? This could be seen a competitive v US but the US needs a Japanese surplus to buy Treasuries. Tangled web.

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