The Purpose Of Repatriation and it's Effect on the USA:
Everyone knows that the Japanese economy has been in a decline for all of the 90's. After a decade of recession and deflation and low interest rates, it would appear that no amount of stimulation and no degree of tax cuts will result in any significant and lasting increase in domestic expenditure in Japan. Japan has a real hole in its banking system, a very large one. Japan still has to find some way to make good the real and potential loss suffered by depositors in Japanese banks- a matter of perhaps some $2.5 trillion. This vast hole in the banking system in Japan requires eventually the repatriation of Japanese assets from abroad, in particular US Gov't Bonds. This would deplete much of the financial world of its liquidity, cause bond yields and other interest rates to jump sky high and topple the foundation on which the Dow and other major stock indices are currently reaching for the clouds. The repatriation of these funds would have widespread devastating effects on the US Economy, its markets and those of the rest of the world.
IMO, Japan has a strategy and it doesn't involve playing vassal to the US any more. They may be able to weather the storm if they repatriate the vast wealth of their investments in the USA.
Japan needs higher ( not lower ) interest rates to have a fighting chance to solve their problems. The Japanese ( in spite of their contradictory statements ) are beginning to slowly realize this. Imagine what would happen if the interest received by Japanese households were to increase 3-fold overnight. Firstly, the total income received on household savings would jump 3-fold per year. Tax on interest could be reduced and the Treasury would still gather more than now. Pensioners would suddenly move above the survival line and have money to spend on comparative luxuries.
Secondly, the productive Japanese worker would have less reason to save every Yen that comes his way and spend more. This shopping spree, in turn, would suddenly have Japanese companies out hiring people to take care of the increased demand.
The process of repatriation has just begun and there is no turning back. At this point, the only possible solution ( outside of a gold backed bond, which entails a much higher gold price ) to Japan's huge banking problem lies in the repatriation of foreign assets. Japan will not be the only one to sink into economic morass.
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