there will be 2 articles attached may you please summarize the articles attached seperatley and add a bibllography and opinion to each (must be at least 2 pgs double spaced) Japan’s Swinging Bonds — A Future Economic Crisis ARTICLE COMMENTS (1) BONDS JAPAN smaller Larger facebook twitter google plus linked in Email Print By Vincent Cignarella The inability of Japanese government debt to stop gyrating wildly poses a significant threat to the country’s climb out of its two-decade economic mire. In the past six months, Japanese 10-year bond yields have swung like a pendulum. The huge swings were never more prescient than Thursday, when the yield jumped over 1.0% for the first time in over a year. That volatility poses a significant threat to Japan, specifically through the balance sheets of its banks. In a statement clearly acknowledging those risks, Bank of Japan Governor Haruhiko Kuroda said Friday that it is “extremely desirable” for the nation’s debt market to be stable. When it comes to government debt, Japan’s biggest banks are all in. Consolidated financial statements of  Mizuho Financial Group 8411.TO 0.00%  and Mitsubishi Financial Group show they each hold 23% of total assets in Japanese national government and a variety of government agency bonds. As that debt vacillates in price so do the banks’ Tier 1 capital asset ratios and presumably their ability to lend and create loans. Japanese banks would face 6.6 trillion yen in losses should interest rates rise broadly by one percentage point, according to the Bank of Japan. One week into 2013, 10-year government bonds climbed in yield to nearly 0.85% from early December lows of 0.69%. They then fell dramatically to 0.44% in early April only to climb again violently to the 12-month high on Thursday. All that interest rate volatility and so far, no inflation in sight. Recent gross domestic product figures from Japan showed growth of 3.5% on an annual basis but the GDP deflator, a measure of inflation printed at a decline of 1.2% from a year earlier. That is 14 consecutive negative quarters. If these government bond yields continue to gyrate beyond the central bank’s control and no inflation comes, the government stands to lose credibility domestically. That credibility is already somewhat in question given during his first term as prime minister, Shinzo Abe lacked the political power to follow central bank action with his own government reform. Without that reform, Abe’s goal of 2% inflation within two years is in grave peril. If he has any doubts about the need for government action, look no further than U.S. Personal Consumption Expenditures, the Federal Reserve’s favorite indicator for inflation, was 2.5% in 2008 before the global financial crisis took hold. Now almost five years later and massive quantitative easing from the Fed, the PCE is just 1.1% because there has been no help from fiscal policy. The importance of credibility is even greater in Japan, where local investors finan.

1. there will be 2 articles attached may you please summarize the
articles attached seperatley and add a bibllography and opinion
to each (must be at least 2 pgs double spaced)
Japan’s Swinging Bonds — A Future Economic Crisis
ARTICLE
COMMENTS (1)
BONDS
JAPAN
smaller
Larger
facebook
twitter
google plus
linked in
Email
Print
By Vincent Cignarella
The inability of Japanese government debt to stop gyrating
wildly poses a significant threat to the country’s climb out of its
two-decade economic mire.
In the past six months, Japanese 10-year bond yields have
swung like a pendulum. The huge swings were never more
prescient than Thursday, when the yield jumped over 1.0% for
the first time in over a year.
That volatility poses a significant threat to Japan, specifically
through the balance sheets of its banks. In a statement clearly
acknowledging those risks, Bank of Japan Governor Haruhiko
Kuroda said Friday that it is “extremely desirable” for the
nation’s debt market to be stable.
When it comes to government debt, Japan’s biggest banks are
all in. Consolidated financial statements of
Mizuho Financial Group

2. 8411.TO
0.00%
and Mitsubishi Financial Group show they each hold 23% of
total assets in Japanese national government and a variety of
government agency bonds.
As that debt vacillates in price so do the banks’ Tier 1 capital
asset ratios and presumably their ability to lend and create
loans. Japanese banks would face 6.6 trillion yen in losses
should interest rates rise broadly by one percentage point,
according to the Bank of Japan.
One week into 2013, 10-year government bonds climbed in
yield to nearly 0.85% from early December lows of 0.69%. They
then fell dramatically to 0.44% in early April only to climb
again violently to the 12-month high on Thursday. All that
interest rate volatility and so far, no inflation in sight.
Recent gross domestic product figures from Japan showed
growth of 3.5% on an annual basis but the GDP deflator, a
measure of inflation printed at a decline of 1.2% from a year
earlier. That is 14 consecutive negative quarters.
If these government bond yields continue to gyrate beyond the
central bank’s control and no inflation comes, the government
stands to lose credibility domestically.
That credibility is already somewhat in question given during
his first term as prime minister, Shinzo Abe lacked the political
power to follow central bank action with his own government
reform. Without that reform, Abe’s goal of 2% inflation within
two years is in grave peril.
If he has any doubts about the need for government action, look
no further than U.S. Personal Consumption Expenditures, the
Federal Reserve’s favorite indicator for inflation, was 2.5% in
2008 before the global financial crisis took hold. Now almost
five years later and massive quantitative easing from the Fed,
the PCE is just 1.1% because there has been no help from fiscal
policy.
The importance of credibility is even greater in Japan, where

3. local investors finance outstanding government debt to the tune
of 90% of the total outstanding. And given the government’s
call for higher interest rates, foreign investors are not likely to
pick up the slack of domestic savers dumping debt.
The challenge the Prime Minister faces is that he must raise
rates to levels that will create inflationary expectations but at a
pace slow enough to allow banks to minimize the impact on
their balance sheets, while also stimulating growth; a lot of
balls to keep in the air.
The potential fallout, a sharp drop in Japanese bonds prices,
would impair banks balance sheets, reduce the wealth of
Japanese savers and hit the wealth effect. The very thing the
government must foster to stimulate growth and increase
inflationary expectations.
(Vincent Cignarella is a currency strategist/columnist for DJ FX
Trader and co-inventor of The Wall Street Journal Dollar Index,
with 30 years experience in currency markets including as a
bank dealer at major money-center commercial banks. He can be
reached at
[email protected]
)
And the Winner Is … the Euro?
ARTICLE
COMMENTS
EURO
FOREIGN EXCHANGE
FOREX
US DOLLAR
smaller
Larger
facebook
twitter
google plus
linked in

4. Email
Print
COMMENTARY
By John McCarthy
A copy of Mario Draghi’s signature is seen beneath the
European Union (EU) flag on a five euro note. Photo-
Bloomberg News
The race to the bottom that the dollar and the euro embarked on
in the aftermath of the 2008 financial crisis now has become a
race to the top.
And despite the constant chatter of the dollar’s resurgence and
the restoration of U.S. economic dominance, it’s the euro that
seems to be winning.
If that sounds incongruous against the euro zone’s continuing
economic woes, another look at the past four years might help
to make some sense of it.
In March 2009, the U.S. mortgage crisis was subsiding and
policymakers turned their attention toward trying to restore
growth. Thus the dollar came under continuing pressure from
aggressive rounds of “quantitative easing” bond buying by an
increasingly interventionist Federal Reserve. Not long after that
the economic and political travails of Greece, Ireland, Portugal,
Spain and Italy put the efficacy of the euro project into
question. The end result was that both currencies sank against
the rest of the world.
Now the focus is on the dollar’s rebound
. That’s perhaps not surprising given that the U.S. currency is
the preferred benchmark for most of the world’s currencies. It
also comes with a handy narrative dealing with long-awaited
economic improvement and tightening labor market conditions.
Bond yields have crept higher as talk takes hold that the Fed is
preparing to taper its bond purchases. Energy independence,
improving home sales, even evidence of some manufacturing
“onsourcing” all add to the improving outlook here.
But a closer look will reveal that most of the dollar’s gains
against the yen, the Australian and New Zealand dollars, the

5. Mexican peso, the South African rand and other emerging-
market currencies have been matched and in some cases
exceeded by gains in the euro against the same basket of
currencies.
Why is this so?
I’ve heard of no analyst crawling from under a rock and calling
for a rapid turnaround in the euro zone or an immediate end to
the fiscal crisis there. No, you have to consider how the
financial landscape is changing from what prevailed after the
crisis. You’ll note that although these changes are being partly
influenced by events here in the U.S., so much of the catalyst
for the dollar’s and euro’s rebound originates in other regions.
The turning point came last summer when European Central
Bank President Mario Draghi
vowed to backstop the European periphery’s embattled
sovereign-bond markets
with the ECB’s balance sheet and immediately put a stake
through the heart of the euro’s existential crisis. The single
currency stabilized as the threat of a euro breakup receded. This
also put an end to much of the talk of global financial
Armageddon and the overall failure of capitalism. The focus in
world markets slowly returned to relative and not absolute
questions–and it seems the market has concluded that in most
cases it was the euro that was the most undervalued.
What followed next was the election of a new Japanese
government led by Prime Minister Shinzo Abe, the
commencement of “Abenomics” with its centerpiece of
aggressive inflation-targeting monetary policy
, and the end of safe-haven inflows into the Japanese money
markets. Thus the yen fell as short-covering intensified. But
while dollar/yen grabbed the headlines, the euro’s rise against
the Japanese currency exceeded the dollar’s rise by almost 5%.
Now, investor concerns have shifted to the health of the Chinese
economy, which has in turn put commodity bloc currencies
under heavy selling pressure. The leaders in that particular
selloff have been the Australian and New Zealand dollars,

6. whose appeal has been further undermined by rate cuts and
central-bank interventions. But the resulting rally in
euro/Aussie has been greater than the fall in Aussie/dollar.
Meanwhile, the prospect of a Fed pullback has spooked bond
markets around the world. This has filtered through to the
emerging-market world, whose currencies are under renewed
pressure. Commodity and labor concerns in South Africa have
extended that currency’s slide. Again, the euro recorded gains
along with the dollar against much of the emerging-market
world.
Two of the main outliers in this trend aren’t insignificant
currencies: the Swiss franc and the pound. It has been less clear
that these two have dropped more against the euro than the
dollar.
Still, the overall picture is one of a European currency that is at
least holding its own against the dollar.
It’s worth remembering a line from Ecclesiastes: “The race is
not to the swift, nor the battle to the strong….time and chance
happen to them all.”
In this case the dollar may be swifter and stronger but it hasn’t
necessarily won the race. The yen, Aussie, kiwi, peso and rand
stories will help determine the race’s outcome as well. Sadly, a
stronger euro, achieved in this case by “time and chance”
represents an unwelcome outcome and will likely delay any
prospect of brighter economic forecasts from Europe any time
soon.
But that’s a story for later.
smaller