> I am also no student of Japan! (who is, anyone here...there were some > East Asia watchers down under, no...Rob?)
I'll be your sensei, since I've lived here for 12 years and have made a weekly ritual of reading the Nikkei Weekly and the Nihon Keizai Shimbun (and BusinessWeek when I need to see what the stooges of western capital are spouting for their overlords). > > Anyway, one thing I can say is that the idea of downgrading Japanese > sovereign debt (as Moody's has already done and is considering doing > again) is another case study in misunderstanding modern money. I think Moody's and S&P should be restricted to doing rating of companies and funds. And after Enron, they both look like a bunch of stooges for capital. I hate to exaggerate the Enron thing now because it's clear the ruling financial crew will get through it with very little truth coming out (we are already suppose to assimilate it as a victory of the American system since it was brought down), but I think Enron got better ratings from Moody's and S&P than Japan's debt until late last year. > > The ability to service its own yen-denominated debt is in no way > compromised by the size or persistence of Japanese deficits. The > ratings agencies are rating default risk here. I think the theory at work here is that long term interests are affected by the current fiscal picture (which makes Italy look promising). > > Private debt, or governments on a gold standard or running a currency > board or with a fixed-exchange rate, or debt denominated in a foreign > currency are all different matters, but home currency denominated debt > issued by sovereign governments that operate with floating exchange > rates are not in danger of default. Agree, however I'd add the yen-dollar exchange rates floats only in the range the US determines for its trade and investment policies toward Japan. > > That doesn't mean that deficits may not cause other problems or > sometimes be too big, or that a government may not ever choose to > default (be unwilling to pay as opposed to unable to pay). But if > Moody's or any other rating agency believes Japan might choose to > default, it should provide some evidence in support of this belief. As > it stands now, it appears that Moody's is simply not understanding the > special case of sovereign debt in a modern (flexible exchange rate) > system. > Of course, but vulture capital likes distressed assets and hedge funds like panicked economies. Who at a ratings firm or as an analyst or economist at a western merchant bank has ever been fired or demoted for saying bad things about the Japanese gov't or the direction of the economy (except that despite it all the yen was sure to rise)? For the past 5 years that is all the analysts at the investment banks have done--pooh poohed everything and then said things sure to contribute to panic. BW ' and Bremners' last year of idiocy tops it all. Charles Jannuzi
