Japanese Yen: The Next Currency Set to Fail

Japanese Yen: The Next Currency Set to Fail
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Japanese Yen: The Next Currency Set to Fail by Jeff D. Opdyke, The Sovereign Investor.

The future of Japan — and at this point it’s shaping up as quite the sad future — sits alone on a stump in a picturesque valley on the southern island of Shikoku.

It’s a scarecrow.

Not the skinny broomstick scarecrows populating backyard gardens across America. It’s a hand-stitched figure that looks almost lifelike in her pants and rain boots, a pink anorak and a sun hat. Tsukimi Ayano stitched this scarecrow, one of about 150 she has fashioned and scattered around her hometown of Nagoro. The village now numbers just 35 living residents, and the scarecrows are a reminder of all who have passed or left as the city slowly slips into Japanese history.

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The town and its scarecrows have become Japan’s version of a looking glass, and the Japanese know this. They can see the future and they realize that, because of social and economic dogma, they’re on the path to extinction as a race, just as Nagoro is on the path to extinction as a village. And as callous at it sounds, there’s money to be made in Japan’s economic collapse.

Japan’s growing problem is two pronged:

  1. It has heinous demographics.

Japan is the most rapidly aging country in the world because of atrociously low birth rates and a xenophobic mindset toward mass immigration that would allow migrants to repopulate the country — albeit without Japanese bloodlines. By 2060, the country’s current population of nearly 130 million will be below 90 million — and 40% of those people will have topped 65 years.

By 2110, less than 43 million Japanese will likely populate the nation, and an even greater percentage will be retirees.

That’s a significant dilemma because…

  1. Japan has an unwavering and flawed belief in Keynesian economics.

Keynesianism is the oxymoronic belief — more moronic than oxy — that a country can, through the government, tax, spend, devalue the currency and inflate its way to prosperity. It’s precisely why the West is so sick today. Government has gorged on too much public debt over the last many decades in an effort to keep Western citizens happy and middle class.

The fiscal situations that now exist in America and Western Europe prove that Keynesianism is largely a discredited economic model. But in the context of a population declining as fast as Japan’s, the economic philosophy is the equivalent of putting an obese person on a high-calorie diet.

Because of its longstanding faith in the fallacy of Keynesian theology, Japan is already headed in the wrong direction economically. It’s home to a debt load that is the highest in the world at more than 225% of GDP, more than double the troubled debt load here at home.

Consider what happens to a population that is A) shrinking, while B) the government continues to pile on additional debts to stimulate the economy, which is exactly what Japan is doing with its last-gasp Abenomics economic policies. The fewer and fewer Japanese will be less and less able to support the economic growth — and the taxes — needed to repay the larger and larger governmental debts. And that’s especially true when you consider how many of those people are retirees, no longer generating a paycheck or spending to the degree that younger workers do.

That’s why Japan is an all but lost cause at this point.

The Fading Yen

There’s talk in Japan that leaders, realizing the quandary their country faces, are now considering allowing mass immigration — though whether that actually happens is debatable, given the militantly insular nature of Japan’s belief in cultural purity.

But even that won’t save the country from the gaping fiscal problems it now has because of decades of Keynesian ideology. Japan needs to start over. It won’t, of course. Instead, through a massive currency-printing campaign, it will sacrifice the yen in a desperate effort to generate any kind of growth it can.

No sustained growth is possible, though, for a litany of reasons, such as: Older people are not spending heavily on the consumer items and services that grow the economy; too much tax revenue now must be funneled into debt repayment; and Japan’s once-vaunted savings rate has plunged to near-U.S.-like levels.

Ultimately, Japan is going to face an existential crisis wrapped up in a fiscal, financial and economic crisis. And as part of that, the Japanese yen the world knows today will fade into history.

On the way to that point, the yen, now in the range of 119 to the dollar, will plunge through 200 or 300 to the dollar, meaning anyone who shorts the yen against the dollar in the medium- to long-term is going to make a small fortune on the demise of Japan.

This is exactly why I’ve put readers of my Sovereign Investor monthly newsletter into an exchange-traded fund (ETF) that profits when the yen declines. The endgame is clear in Japan … and the end draws nearer with every new Keynesian plan the country introduces. The road does not end well for Japan.

But there’s money to be made on Japan’s economic collapse.

Until next time, stay Sovereign…

Jeff D. Opdyke

Editor, Profit Seeker

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  1. its “it took”, not “it takes” dikhead ! “imbecile” is probably the only word you’ve learned in beijing.. that word is commonly used in people where you’re from. lol a stupid monkey learns a new english word and uses it in every line. its true what the Japanese are saying… you chinks never learn, and never will.. you’ll always be slaves to them !

    anyway, I’m still wondering howr u able to get internet connection ??

  2. i wonder if you even understood the words you’re using.. those words are actually used to people like you! you’re a disgrace to that name you’re using, and since when did you start learning how to use the internet. I’m actually surprise you can even go online !!?? but lets face it, everyone here despise you and where you’re from…

  3. Harv is correct, and even though they have way of thinking but they are really respectful, considerate and kind to others.
    It’s very rare to see a policeman bringing guns, no security guard.
    I live here for 7 years and want to stay for long =)

  4. japan, if you tell the truth, has been in recession for over 30 years now and have perhaps the most rude people on earth, just being themselves.

  5. too many drugs billy. the US $ is the strongest currency on the planet and the envy of the world yet you have the audacity to be totally wrong. that explains a lot about all your problems, you see the world through very cracked lenses!!!!!!!!!!!

  6. The facts prove and the rest of the world knows Japan has been in serious recession for over 30 years yet you choose to lie and say it’s relatively booming. You look like the rest of the low rent foreigners who can only get a job by bending over in front of a jap. soon neither of you will have a job

  7. THAT would be a huge improvement. japs are far below dogs of any kind and the world has long since figured out they can’t be trusted. they’re sneaky!

  8. Of course! They did and continue to do it to themselves thus deserve what they get. Can anyone tell me something positive or good japan has done for the outside world or the environment?? They even took WWI out of their history books and when things get really difficult the traditional japanese way out is the cowardly harri Karri!

  9. The US hasn’t been doing this well in over 30 years on all accounts. Yes a few locations have more slowly growing economies but as a nation again the whole world looks up to us. If you return to a place in the US that isn’t booming you have a location problem. How crazy to say japan is booming when indeed it is sinking into the Pacific. Just because you have to work there doesn’t change the truth. quit lying!

  10. you are delusional! japan will fail for all the good reasons listed and your wishful thinking will not stop anything unless you are a jap pol. then you will accelerate the disaster. there’s no way around this for japan, they are going down!

  11. Japan has been a terrible country both to itself and to the planet. They started WWI, started WWII but took both out of their history books. Worst torture of prisoners in world history. The rape of Nanking, nuff said! Ill-prepared for earthquake and tsunami sending nuclear waste all over and all the way across the Pacific to the US shore! Still killing endangered whales and lying about it. They deserve every bad thing that comes their way and they do nothing good that is recognized. Ye reaps what ye sows. Japan your country politics are dumb and ugly and you shall rightfully pay for being so damn dumb!!!!

  12. “Government has gorged on too much public debt over the last many decades in an effort to keep Western citizens happy and middle class.”

    And being happy and middle class is a bad thing? Actually, Keynesian policies have worked terrifically well if you take the post WW II Marshall Plan, GI Bill, military industrial build-up, as well as the millions of taxpayer funded programs to build roads, highways, power grids, water and waste water treatment facilities, and countless other infrastructure policies.

    The Marshall Plan alone used American tax dollars in a Keynesian effort to rebuild much of Europe and Japan, helping turn Japan (and Germany) into the economic powerhouses that they are now. (Japan’s slow and steady decline will not be from government spending, by the way, but from a cultural mindset where people work themselves to death, leaving no time for making babies).

    On the other hand, asinine trickle down policies wielded by neocon conmen have cut taxes, reduced services and driven up debt. They’ve also transferred wealth to a select few while stripping communities of much needed programs, causing America’s cities to be hollowed out holes.

  13. Population decline is a natural phenomenon, why against it? If the population has grown too much and too many people squeeze in one place, then it will sure decline by itself when time goes and adjust naturally. The GDP calculation is based on population grow as baseline, so it cannot apply to Japan’s current situation. Japan’s economy will eventually adjust by itself toward high technology based and less labor intensive, such as using more robots to do daily routine works and automate anything possible, thus immigrant is not desperately needed too.

    The productivity rate per person is still very high in Japan, the government don’t have to create more jobs since the population is declining, however they should try to increase the income per person, not trying to increase the tax rate. The more a person can earn, the more the tax can be collected, thus increase your tax revenue, simple as that. Abe really don’t have to devalue the yen and push for the GDP grow, it is meaningless on a declining population and actually causes average people on the street become poorer with even less spending power.

    It is true that the Keynesian Economic Model is a total myth and moronic approach, it just widen the rich and poor gap, dump money to companies that never invest back in its own country, causes more problem than it actually benefit. The economy in the West is simply a solid proof of the failed model, but they are still keep packaging themselves as role model and promote it as the best model that everyone should follow, what a denial!

    Remember, the school we all attended since young-age only teach you how to become a “good employee”, work for other people and be a slave to money, but never teach you how to become a “good employer” or entrepreneurship, work for yourself and how to do business by your own. The rich become richer, the poor become poorer, that is the true face of current money system and pure capitalism, the middle-class is just an illusion and simply don’t exist.

  14. I lived in Japan 12 years now and i dont know why people would call it a xenophobic view of immigration. Japan looks at western countries and sees how much damage immigration has done, Terrorisim, riots and general crime.
    Yes I agree the falling birthrate is damaging but Japanese companies are investing heavly in Robotics and offshoring a lot of production.

    When i return to England to visit my family I see a country which has had mass immigration and I dont see it helping the general population or the national economy.
    I see airports which are almost 3rd world and Im always having to make excuses for the failing infrastructure to my Japanese friends and family.
    National debt is high but they have the industry to build on it long term which a lot of the west does not have.
    This story is not about the Japan i live in.

  15. I’d be more worried about Abe trying to push for a military and their lack of relations with Korea and China. China is already wooing Thailand with economic investments (rail system). Also, why no mention of the increased tax from 5 to 8 percent and eventually from 8 to 10 percent? Why no mention of the cost of the Olympics for Japan?

    Japan is not doomed but will become irrelevant in the years to come.

  16. the most polluted country is India, not China, it is well documented. with japan and fukushima Island incident, as usual the lying government is hiding the contamination data from the public. Japan is also the origination of Super Gonorrhea, worse Transmit Disease after AIDS,

  17. Dunno the economic intricacies but I live in Tokyo but return often to the US and compared to the US Japan is booming. True, the countryside is a little sad but who needs it. There is still plenty of imported and domestic food on the shelves and businesses are thriving. Just watched a show where Brother, a sewing machine maker now makes printers. Hitachi is making trains which is a vital product, especially for the developing world. Fuji Film is now in the cosmetics biz because collagen, a big part of making photo film is also an essential ingredient in make up. In other words this place has the brains and courage to do innovative things and if it isn’t manufacturing and selling solid, vital and essential goods to support an economy then nothing will and some creepy FOX News trickle-down scare tactics are meaningless.

  18. UN just downgraded Mount Fuji to be a place of trash, with Fukushima Island still not under control, Japan is truly a place of trash.

  19. if Japanese is smarter than Chinese, little japan wouldn’t be in recession for last 3 decades. It is proven japan is a loser country since the end of ww2. Killing the messenger wouldn’t kill the message, blaming Chinese or the others won’t help the demise of japan. Dave is either a Japanese or a Japanese jockstrap supporter, truth has hurt her feeling.

  20. everybody know japan is doomed, japan economic + Abenomic = doom. Abenomic is just accelerating the process, japan will go back to where it belong, a third world country.

  21. Dave’s brain is filled with atomic dusts, japan is beyond help, karma is catching up on them, divine nature is going make little japan extinct.

  22. This article assumes the worst of Japan’s situation as if the Japanese are helpless to reverse the trend whatsoever. I am not convinced by such sensationalism especially when it is backed by shallow analysis. Not to deny the problems that Japan faces, but I am not certain how any serious researcher can argue this:

    “They can see the future and they realize that, because of social and economic dogma, they’re on the path to extinction as a race, just as Nagoro is on the path to extinction as a village.”

    Really, the “extinction” of the race? Especially coupled with the idea that Japan, as a nation and a people, have no ability to reverse the trend. Ridiculous assertion in what was a pretty shallow article.

  23. If the QE experiment of the US is said to follow the Japaneses then it follows the the US currency is the next currency to _____ (fill in the blank.) Buy Gold!

  24. A footnote to my post: The writer’s phrase “militantly insular nature of Japan’s belief in cultural purity” can only be described as polemical as are such expressions as “heinous demographics”, using an adjective normally reserved for criminal acts.

  25. This is a polemic, following a wearingly familiar pattern. Fortunately, Japan has ignored the siren calls over many years from (mostly) western countries to open itself up to mass immigration. Like drug addicts that wish to persuade others to take up their self-destructive habit they tried to cajole Japan to follow the same ruinous path that they have taken with catastrophic results for their own societies. In fact, Japan has for many years accepted immigrants but of the sort that benefit its economy and society. That is, through a gradual, manageable absorption (mainly via intermarriage with Japanese) of culturally empathetic foreigners. No open doors to all and sundry, many from culturally alien regions and a certain hostile religion which have no intention of assimilating with the host society. Europe by its quick fix solution to a temporary labor shortage has created a permanent problem for itself.

  26. Sadly, everything that Jeff Opdyke said above is true. …….The die is cast. “iacta alea est” Japan is headed towards extinction. Any correctional course, it’s too late.

  27. This article is soo stupid and wrong about everything. South American countries and east european countries will fail before Japan does (if they ever)

  28. Wow, how much did Abe pay you to write that piece of propaganda? You better start asking him to pay you in US dollars. The Yen is sinking faster than Nagumo’s fleet.

  29. Mainstream global economic policies are ALL Keynesian, and ALL have attributes similar to a PONZI Scheme. It will take many decades for the rest of the world to acknowledge this. Migration and immigration cannot solve the long term problem; the concept of the ZERO-GROWTH BOOM will have to be awakened, explored, and realized. This is an unprecedented evolutionary challenge, and it must be addressed; failure will mean the demise of this civilization.

  30. the yen died 20 years ago, but has been on mechanical life-support since then. Unfortunately, the power is about to be cut off from the life-support machine. So Long Abe, you fool!

  31. Low gdp/inflation/import due to 50% drop in oil is good thing. Obama is a hero who was scapegoat but were able to save the world from great depression. 2013 baton was passed to Abe. World need strong dollar so that conned-sumer spending will increase and economies will not be so weak. Where USA banks got busted trying to manipulate currency market years ago in europe and recently in united kingdom, japan succeeded and manipulating dollar higher. Ise shrine is in 20 year prosper cycle since 2013 and stocks are up huge. It is either 1000 years of manipulation or self fulfilling prophecy. Exporters had huge profit and wage are up exporters are going to help suppliers.
    Japan’s Kuroda bazooka PRINTS money rather than borrow since it does not have things like private Federal Reserve bank that profiteer from the deficit. Even with nuclear plants shut down causing annual $33billion loss and causing big trade deficit, japan have huge CURRENT = trade + investment gain. Government debt is just providing a safe place for Japanese bank savings and only 9% are owned by foreigners. Any time Japan wants, it can manipulate yen higher by dumping some of us$3trillion foreign investment it owns. World should coordinate world wide PRINTING of money to reduce each country’s debt such as PRINT money at 5% of gdp level for all countries. It seems Europe is printing in 2015.
    China/S Korea started newly intensified campaign of Japan bashing after Aoyama disclosed there are huge potential for gas/oil waters around japan. Russia/chinese military aggression plus BRICS stopped USA from pressuring Japan to not to develop and selling military hardware.
    Tourism/shopping is up huge. Experiencing Japan’s omotenashi, beauty, taste, cleanness, following rules, politeness, will also help soften anti-japan feeling of many chinese/koreans visitors.

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