Darren Sinden, Market Commentator for Admiral Markets joined Tip TV today to discuss the Japanese economy and the consequences for the yen.
Japanese Debt to GDP worse than Greece
Sinden began by noting that Japan’s debt position remains precarious, with the debt to GDP ratio looking bad and is actually worse than Greece. He added that the annual GDP growth rate is falling while Government debt is rising.
Oil collapse adds to 2% inflation arrow target miss
Looking to inflation, Sinden continues to note that the Oil price is having an effect, with inflation and GDP trending lower, despite one of PM Abe’s 3 arrows being the targeting of 2% inflation. Sinden added that the IMF, who have a good track record in forecasting have come out to publicly recommend that Japan needs a credible strategy for reducing debt. One of the biggest pressures facing Japan, Sinden added is the inverted demographics of their society.
QE to continue, yen weakens and stocks gain
He continues to highlight that QE has not produced the expected result of 2% inflation, partly due to the oil price collapse but also due to a misalignment between fiscal and monetary policy. With QE expected to continue in Japan, Sinden feels that extended yen weakness will likely mean another big leg up in Japanese equities, many of which underlying businesses are exporters.