One reason I love finance is it gives you reasons to look into the fascinating underbellies of the global economy to answer weird questions.
Here's one: why would someone outside of Japan ever want to loan the Japanese government money at ~0% interest?
cfr.org/blog/puzzle-ja…
Here's one: why would someone outside of Japan ever want to loan the Japanese government money at ~0% interest?
cfr.org/blog/puzzle-ja…
The answer:
They're only loaning the Japanese government money (via buying JGBs) as a side effect of the transaction that they *really* want to do, which is selling dollars [0] to Japanese financial institutions, which is lucrative.
[0] Technically, dollar-denominated exposure.
They're only loaning the Japanese government money (via buying JGBs) as a side effect of the transaction that they *really* want to do, which is selling dollars [0] to Japanese financial institutions, which is lucrative.
[0] Technically, dollar-denominated exposure.
Read on for more interesting tidbits, including how the risk appetite of Japanese fisherman facing retirement dominates the Caribbean domiciled but really US-based issuance CLOs which determine the market for US-based corporate junk bonds.
