The 10 Next Predictable Steps to Japan’s Unfolding Disaster

Executive Summary

• Japan is intentionally devaluing its currency through money printing. The recent boost in the Nikkei is simply the result of this flood of new money.
• Japan industry is now experiencing cost increases on two fronts: inflation of the money supply, and rising prices on the global market for commodities.
• Rising bond rates are all but guaranteed.
• Gold vs. the yen is surging and will pick up momentum from here
• The ten predictable events that will happen next, as the unavoidable Japan disaster unfolds

If you have not yet read Part I: The Arrival of Japan's Sunset available free to all readers, please click here to read it first.

In Part II we explain why Japan has unequivocally entered the terminal phase of its 20-year reflationary experiment.

Further “abundance” harvesting from this point forward will be difficult if not impossible.

Is the devaluation of the yen really the successful technology that will fool nature? We think not. The outcome will have spectacular implications for many global assets, ranging from real estate, to stock markets, to oil and gold.

Observers of Japan from this point forward should be sober about the threshold the country has now crossed. Japan has effectively said to the world: Go ahead, make my day. Sell our currency, give us inflation, and get out of our bonds.

Japan has indeed taken to heart the Krugman dictum, and committed to irresponsibility.

The Nikkei for Kids

In order to be genuinely thrilled about the recent stock market action in the Nikkei, you really have to believe this is not another bear market rally (from extremely low levels).  You also have to believe that somehow Japan, by aggressive devaluation, will actually solve its problems.

From a monetarist's standpoint, Japan’s only problems are those to be found on paper. Ergo, by devaluing its currency it will therefore boost exports, ease the burden of its debt load, and possibly even raise wages. The thesis, embraced by expansionist economists, is that Japan should indeed export inflation and allow global market participants to decide how much Yen, and how much Yen-denominated debt, they want to hold.

The initial global response has of course been swift and strong.