Following Japan

Bond interest rates, US, UK, Canada compared to Japan, 1982 to 2012

In the 1980s Japan followed a well documented path – fast economic growth, large trade surplus rapidly increasing values for both property and financial assets i.e., the Japanese stock market. And of course we all know how that ended; in 1991 we saw enormous crashes in the Japanese property [ .pdf ] and stock markets [ .pdf ].

How about America? In fact, how about the developing nations? The chart above shows the yields on Government securities for The United States (INTGSBUSM193N, black line), the United Kingdom (INTGSBGBM193N, turquoise line), Canada (INTGSBCAM193N, blue line) and Japan (INTGSBJPM193N, red line). An interesting observation arises: Japanese bond yields (again, the red line) are clearly the lowest of the group and, in fact, seem to be leading the other nations down. Of course The West had a large property crash recently and, ignoring the fact that the resurgent equity markets don’t reflect reality, this raises an interesting question: does present day Japan reflect America’s future? Personally I like all things Japanese so I guess the future could be worse.

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