A week before the Japanese market's peak, fund manager Bill Fleckenstein predicted its markets were "on the verge of blowing up". He's back on Talking Numbers to give his take on the country's next move.
A week before the Japanese market's peak, fund manager Bill Fleckenstein predicted its markets were in trouble. Speaking to Talking Numbers on May 14, 2013, Fleckenstein said:
“What is going on in Japan is potentially very, very dangerous not just for Japan but for world markets. And, I’m not speaking about the Nikkei. What has taken place in the Japanese JGB [Japanese government bond] is extraordinary….
“There are huge derivative books in Japan where there’s been tremendous amount of derivatives written assuming that rates would stay low forever. I think this could be on the verge of blowing up. This may be the start of it, this may get quiet, or it may get ugly right now. That will impact the American bond market and it will affect equities everywhere. So, it’s potentially dangerous.”
Fleckenstein has returned to Talking Numbers to say what he thinks is next.
There’s more trouble ahead for Japan, according to Fleckenstein. While the Bank of Japan pursued an expansionary monetary policy, its interest rates rose. Fleckenstein sees the BoJ trying to keep inflation down while preventing volatility in the bond markets.
Does Fleckenstein think the Bank of Japan can walk this tightrope for long? Watch the video above to hear what he thinks is ahead for Japan and its markets.