Neptune Japan opportunities fund manager Chris Taylor believes that Japan will move into technical default as it tackles its growing debt problems.
Speaking at the Fund Strategy Investment Summit in Kitzbuhel, Austria, Taylor said Japan has no one to fall back on and will probably have to go to the International Monetary Fund for help. He said: “People say Japan has a trillion dollars of foreign exchange reserves but that is about the equivalent of a year’s net bond new issuance, so that shows how fast its debt is going up. There is no way the Japanese government can pay off its debt, it is past the point of no return.”
The World Economic Forum report, published in September, ranked Japan 137th out of 139 countries for its outstanding balance of government debt.
However, Taylor said asset allocators should not ignore Japan as its companies have attractive prospects.
He said: “While it is in trouble, the companies spotted it 10-15 years ago and have invested outside Japan, with many earnings from non-OECD countries.
“Japanese companies have a lot more cash on their balance sheets than OECD rivals, putting them in an ideal position to move quickly in terms of investment or M&A activity.”