Japan Called "Next Global Time Bomb" Even As 10-Year Yield Falls To 0.97%

Either the market is wrong or Darius Dale, analyst at Hedgeye is wrong.

Here’s Dales, writing in Fortune about the next global time bomb — Japan.

Currently, the ratio of retirees to working-age Japanese is 35.5%. In just 10 years time, retirees will make up 48%. In a society notorious for luxurious pension packages, going from a 3-to-1 to almost a 2-to-1 ratio in contributors-to-retirees in a matter of just a decade is frightening to say the least. And it doesn’t get any better: By 2050, the ratio of retirees to working-age population will reach 76.4%, according to projections from Japan’s Ministry of Health, Labour and Welfare.

The obvious conclusion here is that there will be more and more people in line for pension payouts and fewer and fewer people to fund them. The funding outlook looks even more bearish when one considers that 56% of Japanese workers rely on financial support from their parents or other sources to cover their living expenses (Japanese labour Ministry). In other words, the people Japan is counting on most to fund ever-increasing pension liabilities are being supported by the very payouts they are supposed to be covering. This is not good.

Naturally he sees a future funding crisis.

And here’s the Japanese yield curve, flatter yet again today. The 10-year is at 0.97%.


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