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Alternative Market Briefing

Hedge fund manager claims Japanese debt worse than that in Greece

Tuesday, December 11, 2012

Beverly Chandler, Opalesque London: Hedge fund manager, Chris Rigg, from Audley Capital believes that the debt levels in Japan are worse by some measures than those in Greece. Rigg has issued a stark message about investment in Japanese bonds.

"The level of debt Japan is running, which by some measures is far worse than in Greece, is unsustainable," said Rigg. "With net debt at 140% even if Japan were to run a budget where revenue and expenditure were balanced before interest costs, the economy would have to grow by 1.8% in nominal terms just to stabilize the debt/GDP ratio. The reality is that the Japanese government spends twice as much as tax revenue and debt servicing costs consume half of tax revenue."

Rigg said: "Japan enjoys some of the lowest borrowing rates in the world, principally because of its current account surplus but this is now shrinking fast with Japan running its first seasonally adjusted deficit since 1981."

Looking towards the Japanese general election on 16th December, Rigg notes that all polls are predicting a defeat for Yoshihiko's Noda's Democratic Party of Japan. "We are looking for a major correction in bonds, currently near historic highs, whilst equities should increase, as the new government undertakes moves to eradicate deflation before the imposition of a consumption tax in April 2014".

"We think the best way for Japan to exit deflation woul......................

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