why would they buy us bonds.. when their gov/banks will be selling them shortly before nuclear financial winter...
Thy already are. The yen dropped 15.5 percent against the dollar in the last 12 months. Japanese citizens have been dumping the yen to buy gold and foreign government bonds, per the following article I cited earlier. Here's an excerpt...
Weak yen
Ikeda said the spot gold rate quoted at Tanaka late Thursday was 1,333 yen per gram, compared with 1,049 yen in January 2001. "The weaker yen and the deposit-insurance changes are coming into play," he said.
While surely there is a measure of speculative investing going on here, both in the spot market and more so in the futures market, most Japanese individual investors are looking for an asset that offers protection and a return -- and there aren't many around.
With consumer prices in Japan falling for a few years now, cash has a certain attractiveness as deflation persists because consumers' yen will buy more tomorrow than today. Or will it?
Ken Landon, currency strategist at Deutsche Bank in Tokyo, says inflationary signals are flashing.
"The price of gold in yen terms has increased 30 percent in little over a year," he said. "And if you've held yen (C_JPY: news, chart, profile), you've lost 15.5 percent against the dollar over the last 12 months. You don't want to hold yen cash because the value is really falling."
The yen finished Tokyo trading near 134.10 to the dollar, down from 133.90 the previous day.
Foreign-exchange deposit accounts pioneered years ago here by Citibank (C: news, chart, profile) and copied by local banks are doing brisk business with customers converting yen into dollars and other currencies.
Individual investors have also poured money into foreign government bonds. The top three securities houses report sales of 1.08 trillion yen so far in the fiscal year ending March 31, nearly double the 570 billion yen in foreign government bond sales seen over the entire previous year.
"It indicates a lack of confidence in the Japanese financial system," Landon said.
To combat deflation, Japan's central bank has pumped so much liquidity into the system that the country's monetary base last month expanded by 23 percent -- its fastest pace since December 1972. "The price of a paper currency can be driven lower by expectations that a government will overly inflate the supply of its currency," said Landon.
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