Category Archives: China

Japan sees long deflation in US, bets on falling Treasury yields.


“The recovery is very weak and the U.S. is running the risk of deflation…” say the Japanese investors as they are piling into US Treasuries while expecting the yields to drop sharply. They may be the only ones in current economic environment that have extensive experience investing in deflationary times and so it may be worth wile heeding their advice:

“Demand for Treasuries is very good because of the idle money in the banking system…”

“The medium term risk toward inflation is being caused by potential policy missteps by policy makers in regards to monetary and fiscal policy and the weakening dollar…”

“Any economics textbook would tell you that the massive stimulus from the central government will eventually cause inflation, but the Japanese know it doesn’t have to turn out that way…”

“The U.S. economy has faced a double whammy: the recession and credit contraction. The U.S. will face a triple whammy with deflation. That’s good for the Treasury market.”

Is China betting on deflation in US?


China is reportedly loading up on US treasuries in the face of weakening dollar. This means they are quite happy to collect low interest payments on their massive holdings of US Treasuries for years to come and are not concerned about dollars weakening at the same time. This sound deflationary to me.