Ex-Soros adviser sees Japan crisis by 2020
Takeshi Fujimaki, a former adviser to billionaire George Soros and now a member of Japan’s upper house of parliament, says a fiscal crisis in Asia’s second-biggest economy is inevitable and neither a higher sales tax nor the 2020 Olympics will be able to stop it.
“I decided to become a politician because I think financial crisis will come sooner or later,” Fujimaki said in an interview on Tuesday. “This total debt will continue to increase. I don’t think Japan can survive until 2020.”
Yields on 10-year Japanese government bonds might jump to 70% based on what happened in Russia when it defaulted in 1998, Fujimaki said. The benchmark yield is now the lowest in the world at 0.69% and the cost to protect the sovereign debt from default is near a four-month low at 62 basis points.
Before sweeping to power in December elections, Prime Minister Shinzo Abe’s Liberal Democratic Party outlined in 2011 a plan known as the X-day project to fend off a potential bond crash.
Public debt totalled 924.4 trillion yen (US$9.39 trillion) that year and has ballooned to more than one quadrillion yen, more than twice Japan’s gross domestic product, the highest ratio globally. Abe is set to decide on whether to raise the 5% consumption levy on Oct 1.
“It’s inevitable we will see a very big mess and the LDP has to step down,” said Fujimaki, who won his upper house seat on a Japan Restoration Party ticket in the July 21 ballot.
The Bank of Japan (BoJ) is aiming to stoke 2% inflation in two years by buying more than 7 trillion yen of JGBs a month. Consumer prices excluding fresh food probably rose 0.7% in August from a year earlier, matching the increase in July that was the most since November 2008, according to the median economist estimate compiled by Bloomberg News before the data yesterday.
The core inflation gauge will climb 1.3% in the year starting April 2014 and 1.9% in fiscal 2015, BoJ board members forecast in July, excluding the effects of a planned sales-tax increase to 8% in April and 10% in 2015.
Meanwhile, the statistics bureau said Japan’s inflation accelerated to the fastest pace since 2008 in August on higher energy costs.
Consumer prices excluding fresh food increased 0.8% from a year earlier, the bureau said yesterday. The median forecast of 30 economists surveyed was for a gain of 0.7%. Prices excluding energy and perishables fell 0.1%. – Bloomberg