Japan Pension Fund Becomes Net Government Bond Seller

So far every bet against JGB´s was a disaster.... But is at least not insignificant when the largest buyer for years has turned to a net seller...... I think when you take a look this link, the following presentation, the confident Rating Agencies & yields like this i think it´s safe to assume that the upside for bonds is "not substantial"......

Bisher haben Wetten gegen japanische Staatsanleihen etliche in den Wahnsinn und sicherlich auch in den finanziellen Ruin getrieben... Wenn aber nun der mit Abstand größte Akteur in diesem Segment nach Jahren von einem massiven Käufer zum Verkäufer notiert lässt das zumindest aufhorchen.....Wenn man sich diesen Link , die folgende Präsentation , die ( noch ) optimistischen Rating Agencies & die aktuellen Renditen vor Augen führt darf man sicherlich behaupten das sich das Chance/Risikoverhältnis nicht gerade merklich bessert...

Japan - Past the Point of No Return - By Vitaliy Katsenelson

H/T Barry Ritholtz

Flashback March 2010

The biggest JGB holder on the planet – the Government Pension Investment Fund (GPIF) – which has already admitted it’s no longer able to roll maturing bonds, has announced that it will open credit lines so it doesn’t have to sell them to fund its obligations…

Looks like they had to end the desperate attempt to stop the unavoidable....

Sieht ganz so aus als wenn jetzt der Zeitpunkt gekommen ist wo das Unvermeindliche nicht mehr länger hinausgezögert werden kann.....

Japan Pension Fund Becomes Net Government Bond Seller

July 13 (Bloomberg) -- Japan’s public pension fund sold more government bonds than it bought for the first time in nine years, underscoring concern that an aging population will make domestic investors less able to finance state borrowings.

The fund sold a net 443.2 billion yen ($5 billion) of Japanese government bonds in the year ended March 31, according to Bank of Japan data released last month. It held 79.5 trillion yen of the securities at the fiscal year end, 11.6 percent of the outstanding amount.

The retirement of baby boomers -- defined in Japan as those born between 1947 and 1949 -- may strain the public coffers as soon as 2012, according to Toshihiro Nagahama, chief economist at Dai-Ichi Life Research Institute in Tokyo. “That may be when Japan’s sovereign risk becomes evident,” he said in an interview in May.

So far the € crises has helped to fill the gap......

Da kommt die momentane € Krise ganz passend.....

M.Pettis

China bought a record amount of Japanese government bonds in May, in an apparent move to shift more of its massive foreign exchange reserves into Japanese debt. Chinese net purchases of Japanese government bonds soared to Y735.2bn ($8.3bn) in May, far outpacing the Y541bn in JGBs bought from January to April, according to Japanese finance ministry figures.

It will be interesting to see if or probably better when the BOJ will be "forced" to start QE Version 18 & 19..... With or without QE this alternative looks much more promising.....

Denke der entscheidende Faktor dürfte sein was die BOJ in Sachen QE machen wird.... Dürfte da über die Jahrezehnte wohl dann Version 18.0 & 19.0 sein..... Mit oder ohne QE ich denke diese Alternative dürfte in jedem Fall vielversprechender sein

Maybe This Time It Is Different.........

So far every bet against the Japanese bond market was a disaster..... But the latest move from the GPIF ( $1.37 trln / 66.32percent of its assets in domestic bonds ! see Profile GPIF Government Pension Investment Fund, Japan ) is really looking "unconventional".....

Bisher ist jeder der gegen japanische Staatsanleihen (JGB) gewettet hat übelst auf den Bauch gefallen.... Da der letzte Schritt des 1.37 trln $ schweren und zu knapp 66% in JGB´s investierten GPIF ( mehr Details GPIF Government Pension Investment Fund, Japan ) allerdings doch recht "unkonventionell" daherkommt ist der Ausgang zwischen Bullen und Bären wohl ungewisser denn je.....

H/T Claire Morel / Reuters

‘Japan’s brewing fiasco’ SocGen’s Dylan Grice via FT Alphaville

The biggest JGB holder on the planet – the Government Pension Investment Fund (GPIF) – which has already admitted it’s no longer able to roll maturing bonds, has announced that it will open credit lines so it doesn’t have to sell them to fund its obligations…

To spell that out: we are going into a year in which the government has ¥213 trillion of bonds to roll over… and the biggest holder of JGBs is openly admitting he has no new inflows of money

Click here & here to get the entire report... Some pretty scary charts & the following stat............

Den kompletten Research Report gibt es hier & hier ... Einige extrem unschöne Charts sowie die nachfolgende Zahl..........

So who will fund the Japanese government´s deficit in the future? It is not likely to be the international capital markets, especially if its bonds are offering only a 1.5% yield.

But if international investors were to demand triple that, pricing JGBs in line with international bond market peers (all priced too generously in my opinion) the game would soon be up because Japan´s current debt service already amounts to 35% of pre-bond issuance revenues.

H/T Zero Hedge

For more on this topic make sure you visit the excellent slide show Japan - The Point Of No Return from Vitaliy N. Katsenelson via Barry

Wer mehr zu diesem Thema sehen möchte dem empfehle ich die erstklassige Ansammlung von Charts Japan - The Point Of No Return von Vitaliy N. Katsenelson via Barry

GOLD Is Not A $ Story........ ;-)

Stephen Roach Bashing Central Banks / Bloomberg Interview

Looks like he has recovered from his blip when he went bullish in 2006 Even Roach is bullish, so is it time to sell? ..... Welcome back ;-)

Click on the headline to start the interview.

Sieht ganz so aus als wenn er seine kurze optimistischen Phase aus dem Jahr 2006 Even Roach is bullish, so is it time to sell? überwunden hat.... ;-)

Klickt bitte auf die Überschrift um das Video zu starten.

Housewives Outmaneuver UBS, Deutsche Bank Trading Yen

other examples have shown that when the broader public is entering a market that the end is near..... but with the Bank Of Japan in power......

andere beispiele haben gezeigt das wenn die breite masse etwas für sich entdeckt das dort eher das ende naht.......aber mit unterstützung der Bank Of Japan......

Japanese businessmen, housewives and pensioners betting against the yen in their spare time are wrecking the forecasts of the world's biggest currency traders.

The yen has slumped 4.6 percent to a 4 1/2-year low against the dollar this quarter, making it the worst performer among 72 major currencies and confounding predictions by strategists at Deutsche Bank AG and UBS AG for gains of about 1 percent.

The banks didn't reckon on the risk appetite of Japanese individuals, who are borrowing money like never before to buy currencies with higher yields. They tripled their trading in the year ended March to a record $11 billion a day, according to Tokyo-based Yano Research Institute Ltd., publisher of an annual report on the business. Globally, currency trading by retail investors rose 54 percent in 2006, according to research firm Greenwich Associates in Greenwich, Connecticut.

``Japan's interest rates are too low,'' said Hiroshi Ono, a 40-year-old sales clerk at a telephone company in Tokyo. Ono said he has made about $17,000 since March by borrowing $200,000 of yen and buying U.S. dollars to take advantage of the 4.75 percentage-point difference between Japanese and U.S. interest rates.
Japanese investors are borrowing yen at the central bank's 0.5 percent overnight lending rate and buying higher-yielding currencies in New Zealand, the U.K., Australia and even Brazil to increase returns on 1,536 trillion yen ($12.5 trillion) in savings. The strategy is called the carry trade.

Global trading by investors other than banks, fund managers and companies surged 54 percent last year, said Peter D'Amario, a consultant at Greenwich Associates. The category, which includes retail investors, accounted for 16 percent of trades handled by 1,700 firms surveyed, up from 10 percent a year earlier. It grew 80 percent in Europe, 55 percent in Asia Pacific and 30 percent in the Americas.

In Japan, individuals have opened 600,000 so-called margin trading accounts at brokerages that lend money for currency bets, 80 percent more than a year ago, according to Yano Research

Deposits in margin trading brokerages have risen 60 percent to $4.9 billion in the past year, Yano Research found. While that's about 2 percent of the $272 billion that Japanese individuals have put into mutual funds that invest overseas, borrowing typically makes their positions 10 to 30 times larger

carry trade spreading to japanese households / retail investors

looks like the carry trade don´t need hedge funds and the big player to continue and to inflate.... thanks to the boj for the zero interest rate policy.....

read more about japan and the bank of japan http://nihoncassandra.blogspot.com/

sieht ganz so aus als wenn der carry trade inwzischen sogar den kleinen mann und normalen anleger erreicht hat. ob sich die notenbank bei solch einer entwicklung nicht fragt ob sie was verkehrt gemacht hat. mehr zur boj unter dem o.g. link

The yen was lower against all 16 of the world's most- actively traded currencies over the past month, with the biggest losses versus higher-yielding currencies such as the Australian and New Zealand dollars. Borrowing costs in both countries are 5.75 percentage points and 7 percentage points higher than those in Japan, respectively.


``The yen's downtrend will continue as Japanese, who are fed up with low returns, will continue to export capital,'' Tokyo-based Umemoto said in an interview on April 2. ``Individuals will play the leading role.'' The fastest pace of growth in three years in the quarter ended Dec. 31 gives individuals greater confidence to send money offshore, he said.

Overseas assets held by Japanese households reached 46 trillion yen ($387.2 billion) in 2006, nearly 10 percent of the nation's gross domestic product, but only 3 percent of their total financial holdings, based on Umemoto's own calculations.

Breathing Room
The Japanese currency traded at 118.85 per dollar at 3:04 p.m. in Tokyo from 118.96 late in New York yesterday. The yen is down 0.9 percent this week, the first of the fiscal year that started April 1.


It gained 1 percent last quarter as some investors exited carry trades, where they borrow and sell yen for better returns elsewhere, because of a global slump in stock markets.

``It's likely that there's breathing room for households to shift money from safe but low-return deposits to riskier, higher return assets abroad,'' said Masafumi Yamamoto, a strategist at Nikko Citigroup Ltd. in Tokyo and a former Bank of Japan currency trader. ``The Japanese ratio at 3 percent does not look particularly high.''

Yamamoto is less bearish on the yen than his counterpart at Barclays, predicting the currency will fall to 119 a dollar by June 30. He said Japanese overseas holdings rose 27 percent last year from the previous year, citing data compiled by the Bank of Japan, monthly data from the Investment Trust Association Japan, and Citigroup's own estimates.

Bank Deposits
Japanese mutual funds boosted purchases of assets abroad to about 40 percent of the total from about 8 percent in 2002, according to the Investment Trust Association. The mutual funds now have about $244 billion of assets denominated in foreign currencies, including $98 billion in the U.S. dollar.

The yen weakened 5.9 percent versus the New Zealand dollar and 5.3 percent against Australia's currency in the past month. Australian and New Zealand 10-year government bonds both offer a yield premium, or spread, of 4.20 percentage points over similar-maturity Japanese debt. Securities in Germany give an extra 2.4 points.

>coinicidence / zufall ?

thanks to http://kevinsmarketblog.blogspot.com/index.html

more on the correlation of risk taking and the yen from mike larson http://tinyurl.com/2a5xap

The ratio of Japanese household savings parked in banks and post offices accounted for about half of their total financial assets of 1,550 trillion yen, compared with 10 percent in the U.S. and 30 percent in Europe, Barclays' Umemoto said. That will continue to decrease as more funds go overseas, he said. ....

Japan is seeing a rise in so-called margin trading, where retail investors borrow part of the money necessary to buy currency, seeking to make a profit on price gains.

``The presence of foreign-exchange margin traders is increasing in Tokyo,'' said Kenichiro Yoshida, a senior economist and currency analyst in Tokyo at Mizuho Research Institute, a unit of Japan's second-largest lender by assets. ``Younger generations such as in their 30s are trading currencies even by mobile phone.''

Individual Power
Japanese individuals' foreign currency-denominated assets exceeded 40 trillion yen in 2006, topping such assets held by life insurers, the Nikkei newspaper also reported on March 31, excluding the estimated amount of foreign-currency positions by Japanese foreign-exchange margin traders.

Life insurance companies, commonly known as Seiho in Japanese, used to play a major role in the financial markets of the late 1980s during Japan's asset-inflated bubble economy by purchasing massive amounts of foreign bonds.

``We cannot ignore individual power,'' said Ryohei Muramatsu, manager of Group Treasury Asia at Commerzbank in Tokyo. ``Japanese individuals account for about 20 percent to 30 percent of foreign-exchange margin trading in the Tokyo time zone. Institutional investors will lag behind households.''

> should be no suprise that gold is speaking loud and clear

>gold in yen spricht hier ne eindeutige sprache......

........to be continued......

BOJ Is Watching Land Prices for Excess, Fukui Says

i haver never understand the japanese sense of humor.......

der japanische humor wird mir wohl immer ein geheimnis bleiben ......

i stay with homer..... / da bleibe ich doch lieber bei homer....

March 27 (Bloomberg) -- Bank of Japan Governor Toshihiko Fukui said he's closely monitoring land prices after a report showed real estate in some parts of Tokyo surged as much as 46 percent last year.

``We aren't yet in a situation in which land-price gains warrant concern of excessiveness, but we'd like to keep a close watch on them,'' Fukui said in parliament today. ``Rising land prices won't automatically prompt a rate increase.''

Concern that borrowing costs at 0.5 percent will fuel land- price gains could prompt the Bank of Japan to raise interest rates in the first half of this year. The central bank wants to avoid a repeat of an asset-price bubble, the collapse of which in the early 1990s led to more than a decade of stagnation in the world's second-largest economy.

``Land prices are rising, and that's spreading to other big cities'' .... ``This may increase chances of a rate increase before the July upper house election.''

Commercial land prices in Japan's three biggest cities rose 8.9 percent in 2006, the government said on March 22, as investors were lured by large-scale developments including Mitsui Fudosan Co.'s Tokyo Midtown project, which opens this week.

``We've got a clear impression that the recovery of land prices is becoming evident mainly in large cities,'' Fukui said, adding that gains in Tokyo, Osaka and Nagoya were ``prominent.''

Omotesando Hills
Commercial land in and around the three cities rose for a second straight year, after gaining 1 percent in 2005, the government said last week. Residential land prices increased for the first time in 16 years, up 2.8 percent.

The steepest gains were recorded in areas near Omotesando Hills, a retail and residential development in central Tokyo that opened on Feb. 11 last year. Commercial and residential land prices both rose as much as 46 percent near the project.

Japan's two largest developers will open developments in central Tokyo in coming weeks. Mitsui Fudosan's Tokyo Midtown project includes the city's tallest building. Mitsubishi Estate Co. is scheduled to open a new 42-story skyscraper in front of Tokyo Station in April.

``The recovery in land prices generally reflects the improving outlook for the economy and higher expectations for profits that can be made by utilizing land,'' Fukui said.

Land prices nationwide rose for the first time in 16 years in 2006 as gains in Tokyo, Osaka and Nagoya compensated for drops elsewhere in the country, last week's report showed. Japan's commercial and residential land values are still half the levels reached in 1988.

Some Areas `Overheating'
Finance Minister Koji Omi said last week that the gains don't signal another bubble is emerging. Economic and Fiscal Policy Minister Hiroko Ota said some areas are ``overheating'' and the government will ``watch developments closely.''

more on japan from tim http://tinyurl.com/29rcnr

contrary investor on japan

this is only a small snippet from the very good piece. they also have comments and charts on the boj/monetary base, carry trade etc. interesting that marc faber has something similar to say about japan.
http://immobilienblasen.blogspot.com/2007/03/faber-bloomberg-interview-brilliant-15.html

please click on the headline to read the full piece

diese hier ist nur ein kurzer ausschnitt von der sehr guten analyse. ausserdem sind dort gute charts und kommentare zum yen, boj, carrytrade etc enthalten. hervorzuheben ist ünrigens das faber ne öhnliche auffasung vertritt (s. link oben)

bitte auf die überschrift klicken

...........As we mentioned in the chart below, prior to action early week, the Nikkei price level stood at a percentage differential above it's 200 month MA not seen since 1997. You know that we have argued for years now that the 200 month MA is a very important demarcation line for the Nikkei, first acting as support in the initial post peak descent, being tested as the years progressed, and never being sustainably pierced to the downside until 1997.

But from what was to ultimately be the sustained break of the 200 month MA, the Nikkei dropped another 63% to its final bottom in early 2003, when the great global central banker induced reflation began. Although we may be wrong, in our minds, a sustainable break of the Nikkei to the upside above the 200 month MA will be quite the important tell for the ongoing longer term cyclical bull in Japanese equities. Is the current break to the upside the real deal? As you know, we're going to find out dead ahead. And it may be very important if the 200 month MA can hold amidst a touch of global equity market upheaval, shall we say. .........

..........So what might this mean for Japanese equities? While not necessarily a wild and exciting positive, it's rather a lack of what has been an important negative that's the meaningful point. Again, the Nikkei was probably the worst performing major economy equity market in 2006. And we believe a big piece of the reason behind this was the contraction in domestic monetary aggregates last year. That will be a big prior year negative that is absent in 2007. Is the lack of a negative a positive? Personally, we're more than willing to give thanks for small favors

bank of japan + savings rate

the boj has lost a lot of credibility. on the one hand they want to stop the addiction of cheap money, they want to end the carry trade, they want to implement a forward looking policy, and they have adopted the "core" rate excluding food.....(they are really serious about their inflation fighting mission....) etc.......

die bank of japan (boj) hat meiner meinung nach fast all ihre glaubwürdigkeit verloren. auf der einen seite will sie japans "sucht" nach billigem geld unterbinden, dann wollen sie den carry trade beenden, dann eine vorausschauende zinspolitik implementieren, dann haben sie in schöner us manier mal eben die "kern" rate adoptiert ( man sieht wie ernst es mit der inflationsbekämpfung ist.....

thanks to barry ritholtz http://bigpicture.typepad.com/

the full article (headline) gets to the usual carry trade ( better sources at the label) and deflation issue. i want to focus on the savings rate. this number is really surprising.

der ganze artikel (überschrift klicken) geht auf die üblichen sachen wie carry trade ein. empfehle dazu eher unter dem label zu lesen. ich finde die sparrate am interessantesten. und die ist in der tat ne echte überraschung!

.....The BoJ has been held back until now by the choppy state of the Japanese economy. After a particularly bleak third quarter, when it eked out annualised growth of just 0.3%, the fourth-quarter numbers announced last week came as welcome relief. For the three months to December, the economy grew at an annual rate of 4.8%, its fastest pace in three years. Much of the gain was thanks to stronger personal spending, which was up by an annualised 1.1%. This was mainly a rebound from the previous quarter, when spending fell by much the same amount. ......

The bank is counting on consumption, which accounts for 55% of Japanese GDP, to become the locomotive of the economy. Households are certainly spending what they have. According to the OECD, Japan's household saving rate has fallen by over eight percentage points since 1998, a deeper plunge than America's. The country's households now fail to dispose of just 2.9% of their disposable income.........(wow!!)

at least they have not an official "strong yen policy"............. like the us :-)


here is one example of how widespread the carry trade is (thanks to russ winter )http://wallstreetexaminer.com/blogs/winter/?p=451#comments

Last year, the surge of short-term external debt was engineered by South Korea’s commercial banks, which were anxious to increase profits by borrowing yen to expand domestic household credit. In many instances, Koreans used very low-interest yen credit offered by South Korea’s commercial banks to finance speculative mortgages in the country’s real-estate market. This has left Korean households with large unhedged exposure to the Japanese yen and South Korean banks facing the prospect of widespread mortgage default in the event of the yen’s reversal. South Korea’s commercial banks also have enormous unhedged exposure to the yen through massive carry trades on their own balance sheets.”

"Asian Central Banks May Spook Investors in 2007"

its all about liquidity! to me it looks like the central banks "have" to spook investors or to say it more detailed "speculators".

es geht einzig und alleine um liquidität. meiner meinung müssen die notenbänker dringen eingreifen um investoren oder besser gesagt die spekulanten ein bißchen aufzuschrecken.

(Bloomberg) -- While a housing-led slump in the U.S. economy may indeed emerge as the biggest risk to Asian economies in 2007, a more immediate threat to investors will probably be posed by the region's central banks.

Policy makers in China, South Korea and India may have no option except to aggressively contain domestic liquidity and stamp out asset-price bubbles ....

Relying on ``shock therapy,'' central banks in these countries might end up making overstretched securities -- such as Indian and Chinese equities -- more volatile than they have to be. A case in point was the bloodbath on Indian stock markets earlier this week. ( mmmh, but when you look just 2 days later the market was unchanged close to another all time high. looks like there is much more work to be done.....!/mmmh, nur 2 tage später alles wieder ausgebügelt und nahe einem neuen ath. sieht so aus als wenn dort nich mehr zu tun ist......)

In Asia outside of Japan, lax local financial conditions and the authorities' efforts to deal with them may have a greater bearing on investor sentiment than anything that the Big Three global central banks may or may not do.

Perils of Shock Therapy
Some evidence of that came this week when the benchmark Indian equity index plunged 5.8 percent following the central bank's surprise announcement that it would remove 135 billion rupees ($3 billion) from the banking system by raising the ratio of deposits banks are required to hold as cash.( china did the same "thing"just last week.)

maybe they should be more radical like japan. they have been critizised for halting their rates close to zero. but they have taken action!

So the Bank of Japan did what any self-respecting central bank would do (unfortunatly they are the exception/leider ist das eher die ausnahme). when called on the global carpet for “creating” too much liquidity, they stopped. And not only did they stop, they began an immediate program of erasing their quantitative easing (printing money) efforts of the last half decade by beginning to shrink the Japanese monetary base in very big and rapid fashion. this is from contrary investor. i suggest to read the full excellent piece".

The need for cooling the overheated Indian economy is undeniable. What investors can't take for granted is that it will be accomplished in a credible manner.

The Reserve Bank of India isn't the only Asian monetary authority to resort to shock therapy. In Korea, the reserve requirement on demand deposits is going up by 2 percentage points after Dec. 23 to deflate a housing bubble. The decision, announced by Bank of Korea last month, is the first increase in reserves in almost 17 years.

Fragile Korean Consumer
The question in Korea is whether monetary policy will achieve a soft landing in the housing market or cause it to crash.

According to Samsung Economic Research Institute in Seoul, housing prices nationwide rose more than 11 percent in the first 11 months of 2006, compared with less than 6 percent last year. In overheated pockets, price escalation is even more rapid.

With floating-rate mortgages accounting for 98 percent of the total, a sudden drop in home prices may further depress consumer sentiment, which has yet to recover from a credit-card bubble that burst in 2003. (amazing. the debt latest debttruoble is just 3-4 years old..../ erstaunlich. nachdem der letzte bubble gerade 3-4 jahre alt ist......)

Lee Seong Tae, the central bank governor, made it clear that he won't make a habit of manipulating reserve requirements. That's reassuring. Changes in reserves, because they have long- term effects on money supply and economic activity, are generally seen as a central bank's weapon of last resort. ``The change in required reserves won't come often,'' Lee said.

the fed of course has just done the opposite and has eliminatet the reserve back in 1995./die fed hat im jahr 1995 genaus das gegenteil gemacht und die reserve defacto auf 0 gesetzt. thanks to this "piece What (Really) Happened in 1995?" from aaron krowne / itulip!

The key event that happened around 1995 is that the fractional reserve ratio was not only lowered, it was effectively eliminated entirely. You read that right.

`Heavy Dose of Medicine'
There are strong expectations that the People's Bank of China, which has already raised the reserve ratio by 2 percentage points in three steps since June, will be forced to act again to mop up the surfeit of liquidity being released by its massive trade surplus. (see first link/ siehe erster link)

People's Bank of China's third-quarter monetary policy statement released last month included 70 references to liquidity.

``Given the abundant liquidity, an increase in the reserve requirement ratio by a small margin is not a `heavy dose of medicine,' but rather a fine-tuning,'' the bank said.

Dearer Money
China's liquidity challenge is compounded by expectations of currency appreciation. The yuan, traders reckon, must strengthen substantially against the dollar to reduce the growing likelihood of the U.S. Congress passing punitive legislation against Chinese exports. (the us should be pleased with china thta it pumps all the surplusses back into the $. almost 1 trillion and counting....../ die usa sollen froh sein das china die ganzen überschüsse zurück in den $ pumpt. jetzt ne billionen euro und steigend....)

The one-way bet on yuan appreciation is drawing in overseas capital and pushing up equity prices in Shanghai and real-estate values in Beijing to dizzying heights. as shown "here"

While China's economy is plagued by overinvestment, India's is overheating. ..korea is also surprisingly strong.....

At least in these three Asian nations, investors may not find themselves worrying as much about a U.S.-induced growth slowdown next year as they may about the central banks suddenly turning off the money taps.