For those unable to attend the Initiative on Global Markets conference in March, legendary fund manager Kyle Bass gave a shocking and eye-opening 48 minute presentation on Japanese debt, and how the ¥ will be the first currency to crash and burn in the rapidly escalating global currency war:
The Japanese interest expenditure is nearly ¥11 Trillion. To put that in perspective, their tax revenues are ¥43 Trillion. Japan is spending 1/4 of their tax revenue on interest alone today, with interest rates at zero (5 year bonds are at 17 basis points).
This is the zone of insolvency! There is no looking back! If Abe and Kuroda really achieve some sort of inflationary outcome, and the swaps move, they’re finished. Every 100 basis point move in cost of capital costs Japan ¥11 Trillion. A 200 basis point move has their debt service exceeding central government tax revenue! Those wishing for inflation do not know what they wish for!
Bass’ full MUST, MUST WATCH presentation on Japanese & global debt markets is below:
We suspect Bass’ call is rather prescient, particularly as Japan recently passed the ¥ 1 Quadrillion mark in official debt- roughly 25 X the official Japanese GDP.