Wednesday, May 25, 2011

SocGen On Why Japan's Plunging Pension Reserves May "Cause Havoc" To The Japanese Bond Market

I've always said the Japanese bond market--and hence, economy, was in deep feces due to their aging demographics and huge indebtedness.  And I've always said the US could learn from Japan's demise, as we encounter the same head winds.  The earthquakes, tsunamis, and nuclear fallouts--as tragic as they were--are mere sideshows and will only accelerate the economic downdrafts, as Japan incurs more debt in the reconstruction effort.  The implications are far and wide, as they become net sellers, instead of buyers, of US Treasuries.

Just as the Japanese government has force fed their citizens into Japanese government bonds, nearly nil in returns, it would not surprise me to see the US government mandate retirement funds into US Treasuries--again earning negative returns relative to a higher cost of living.  And they'll declare it our patriotic duty to do so.  If you're a 401K, IRA, or pension fund holder, I'd be nervous (I am).

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