Last night the Nikkei fell to 12,445, down 6.4%. But it wasn't long ago that commentators were rejoicing in Abenomics – the policy moniker for Japan's monetary stimulus and government spending plan – for its bold three-pronged approach to juice the Japanese economy.
Now, with the Nikkei taking a turn for the worse and the yen strengthening, it appears Abenomics has not had the intended effect.
Felix Zulauf, swiss hedge fund manager and macro thinker, goes even further. He thinks Japan will spark a global crisis within the next 18 months.
Zulauf spoke with Financial Sense:
I do believe that this will be the root cause of the next big global crisis whenever it breaks out, probably sometime over the next 12 to 18 months or so. First of all, I think the Japanese situation is very dangerous because Japan’s tax revenues, when you look at the numbers, they have to use almost 50% to service their government debt—their Federal government debt. So if interest rates rise further, Japan is basically bust…I think this is a very dangerous thing that the Japanese are starting and I believe it will most likely be the trigger for the next big global crisis in financial markets and the world economy.
For years, the Bank of Japan has been a bastion of economic conservatism. Not anymore.
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