JGB’s and a Q&A

Posted on 25th September 2012 by Trevor in Uncategorized

QUESTION:  “In case Japan becomes insolvent, what will happen to gov­ern­ment bonds?

日本が財政破綻した場合、国債はどうなりますか : 財務省

 Answer . .  .
“Rest assured!” How bond­hold­ers can pos­si­bly rest assured under these cir­cum­stances remains a mys­tery, in par­tic­u­lar since the MoF then pro­ceeds to tell them exact­ly how they will get kicked in the groin: bonds will be redeemed “respon­si­bly.”

Not when they mature, but respon­si­bly.

Thus, we have the MoF’s offi­cial action plan for the moment when the big S hits the fan, the moment when Japan with its declin­ing wages and shrink­ing working-age pop­u­la­tion can no longer save enough to mop up all the gov­ern­ment bonds nec­es­sary to keep the gov­ern­ment afloat.

A selec­tive default. Bonds will retain their “value,” but the gov­ern­ment won’t redeem them when they mature. It will redeem them in bits and pieces, stretched into all eter­ni­ty, as it sees fit. You’ll die before you’ll see your money.

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