Japan should announce a plan where it uses the interest income on...
Brad Setser@Brad_Setser
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Jan 21, 2026
~1 min read
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Japan should announce a plan where it uses the interest income on the MoF's considerable holdings of US assets (in their reserve portfolio) to buyback the long end of the Japanese curve.
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John Arnold@johnarnold
How did you go bankrupt?
Two ways. Gradually, then suddenly.
Japan 30-year bond yields:
Two ways. Gradually, then suddenly.
Japan 30-year bond yields:
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MoF realizes a tiny fraction of the massive gain on its reserve portfolio (ought at 80-100 JPY to the USD) -- win for JP's taxpayer
and MoF buybacks a portion of its nominal debt stock at a massive discount (another win for JP's taxpayer)
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and MoF buybacks a portion of its nominal debt stock at a massive discount (another win for JP's taxpayer)
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Huge fan of Mr. Arnold's twitter feed by the way --
But no country with $2 trillion (MOF + GPIF) in sovereign foreign assets and a postal savings bank that holds more foreign than domestic assets is going bust ...
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But no country with $2 trillion (MOF + GPIF) in sovereign foreign assets and a postal savings bank that holds more foreign than domestic assets is going bust ...
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Sorry doomers. Gotta learn the BoP not just fiscal
(applies to the IMF too ... )
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(applies to the IMF too ... )
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Think my friend Robin gets the end game here wrong -- my bet is the Japanese turn Postbank back into a captive source of demand for JGBs and the GPIF reallocates back into JGBS (at a massive profit) and the MoF reduces its fx reserves v GDP. 100% different impact on the yen
Robin Brooks@robin_j_brooks
Japan’s plan for dealing with its massive debt overhang is to pretend it isn’t there. That denial explains how you now have proposals to cut taxes even as JGB yields have risen sharply. The BoJ will cap yields, but that makes the Yen the ultimate victim… giftarticle.ft.com/giftarticle/ac…
