In a stunning turn of events, a Japanese Ministry of Finance official admits
to Richard Koo's worst nightmare "Japan is fiscally worse than
Greece". Bloomberg is reporting that, at a conference in Tokyo, Yasushi
Kinoshita says Japan's 2011 fiscal deficit was up to 10% of GDP and its
debt-to-GDP has soared to over 230%. What is more concerning is the Kyle-Bass- /
Hugh-Hendry-recognized concentration risk that Kinoshita admits to also - with a
large amount of JGBs held domestically, the Japanese financial system is
much more vulnerable to fiscal shocks (cough energy price
cough) than Europe. Of course, the market is catatonic in
its reaction to this - mesmerized by the possibility of buybacks and
hypnotized at big-banks-passing-stress-tests - though we do note the small
reverse stronger in USDJPY has reversed as this news broke and the USD pushes
modestly higher.
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