Tuesday, June 9, 2009

Deflation & Debt: Japan

Japanese producer prices dropped by 5.4% (year over year) as announced by the Bank of Japan today.

There are several structural differences between our economy and the Japanese economy. However, their sovereign debt to GDP ratio is approximately 1.4:1 (they have 1.4 yen worth of debt for each yen of GDP) and they are experiencing deflation. Please keep this in mind if you are considering the reflation trade.

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