The Japanese yen will likely “weaken significantly” against the dollar according to Hayman Capital’s Kyle Bass. He spoke to Reuters at the GAIM Hedge Fund Conference in Florida this week. Bass has been bearish on Japan for some time, although there’s a lot of debate right now on whether his view is correct. His Japan-focused hedge fund has not performed well at all, and some speculate that the hedge fund will sustain major losses when it closes in a few months.
Bass told Reuters this week that he believes the yen will go “north of 200 to the dollar,” a significant move because currently the yen is a little less than 90 to the dollar. He said it’s because the nation never went through the creative destruction period that he believes was necessary. He said the Japanese government just smoothed over the volatility, and he believes that everyone in Japan is in denial about what is happening to their nation’s economy.
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“I think what you have to realize is when your debts are 24 times your central government’s tax revenue and you have a secular decline in population, and all of the things are finally catching up to you, what happens when you have a debt crisis?” Bass asked. “Your currency collapses.”
He also said he believes that when the Japanese yen does collapse, it will have a major social impact on the nation, with many Japanese losing 30 to 50 percent of their savings. According to Bass, “there’s no way out for Japan.” He says it’s “when and not if” the nation’s currency collapses.
Bass also believes that the rest of the world will follow in Japan’s footsteps, although he said he feels the U.S. and possibly Europe are years away from going through what he expects Japan will very soon. According to Bass, the central banks are enabling spending to go higher and higher, and eventually all of that debt will negatively impact the currency.