Weekly Market Update by Retirement Lifestyle Advocates

Japanese Debt Rooster Coming Home to Roost

         Since the financial crisis of more than fifteen years ago, I have been warning that there is simply too much debt in the world to ever possibly be paid.  This is true of both private sector debt in many countries and, more universally accurate for government debt.

         World central banks have responded to these debt levels by creating more fiat currencies totally from thin air to prop up bond markets.

         Now, however, it seems that the realities of debt excesses are setting in.  The 30-year US Government Bond saw yields creep back above 5% last week; mortgage rates followed suit.

         But the real story last week was Japan.  If you’re an American retiree or investor, monitoring the Japanese situation is important since the United States is on the same path from a monetary policy standpoint.  The United States’ central bank, the Federal Reserve, reduced interest rates to zero in 2008 and began its program of quantitative easing (currency creation from thin air) at about the same time.  The Japanese central bank cut interest rates to zero in 1999 and began quantitative easing in 2001.

         Since the program of quantitative easing began in Japan, the Japanese central bank has become very aggressive with its monetary policy.  The country’s central bank is now the largest owner of Japanese stocks and bonds in the world.  (Source:  https://www.zerohedge.com/news/2025-05-20/japan-finally-about-go-bust). The situation in Japan has reached such extreme levels that there are times Japanese Government Bonds don’t even trade since the Japanese central bank owns such a large share of the market. 

         After 25 years of central bank subsidization of reckless government deficit spending, the balance sheet of the Japanese central bank is now about the same size as the entire economic output, or gross domestic product of Japan!  In other words, the Japanese central bank has created currency in an amount about equal to one year of production by the entire Japanese economy!

         As noted above, the debt rooster is coming home to roost in Japan.  Keep in mind two things as you read this:

1.  The United States is on the same path as Japan, just a few years behind.
2. The Japanese people have been purchasers of Japanese debt or bonds in far greater quantities than US citizens have been here in the Untied States.

         That said, Japan just experienced its worst government bond auction since 1987.  Spiking bond yields in Japan indicate that investors are beginning to avoid Japanese government debt since there is literally no way for Japan to recover from its fatal self-inflicted debt wound.

         Japan’s debt levels are now affecting its economy, as the country is facing what may be the most severe financial crisis since World War II. Protestors are assembling outside government buildings in Tokyo, shouting, “We are not your ATM.”

         Rice, a staple in the Japanese diet, has almost disappeared from grocery store shelves as stagflation grips the economy.  (Source:  https://citizenwatchreport.com/crisis-in-japan-massive-debt-is-collapsing-japans-entire-economy-protests-everywhere/)

         Prices for staples are skyrocketing while wages remain flat.  Sales of furikake, a rice seasoning used to make plain rice more appetizing, are at an all-time high since many families can’t afford to buy the rice that is available.

         Protests are likely just getting started.  The Japanese economy will continue to suffocate under the weight of extreme debt levels and the only play left in the playbook of the central bankers, currency creation, will only exacerbate the problem.

         Interestingly, Japanese citizens who diversified from Yen, the Japanese currency, and into gold have found that it’s been a savvy move for them.  This chart of gold priced in Japanese Yen (Source:  https://goldprice.org/gold-price-japan.html) tells the story.  Since 2018, gold, priced in Japanese Yen, has roughly quadrupled in price.

April US Home Sales Weakest Since the Great Financial Crisis

         US home sales declined by .5% in April from March, far worse than the forecast increase in home sales of 2%.  (Source:  https://www.zerohedge.com/personal-finance/us-existing-home-sales-weakest-april-great-financial-crisis)

         Interestingly, home sales bifurcated into two markets: higher-end homes, which posted sales gains, and lower-end homes that posted big declines.  This, in my view, is reflective of the total economy.  The inflation of the past several years has benefited those with assets and harmed those with no assets.

         Sales of homes priced between $750k and $1 million increased by 5.2% from one year ago, and sales of homes priced over $1 million increased by 5.8% from this time last year.

         On the other hand, homes priced at less than $100k saw sales decline 14% from one year ago, and homes priced between $100k and $250k experienced a decline in sales of 4.2% from one year ago.

         Overall, home inventories are up 21% from one year ago.  While average home prices are still increasing ever-so-slightly due to the sales activity of higher-end homes, those increases were the smallest in two years.

         I expect this trend to continue as the deflation part of the cycle will likely accelerate from here.  

RLA Radio

         This week’s RLA radio program features an interview I did with Mr. Gerald Celente, the publisher of Trends Journal. The interview is posted and available now by clicking on the "Podcast" tab at the top of this page.

Quote of the Week

“I find a duck’s opinion of me is very much influenced by whether or not I have bread.”

                                                      -Mitch Hedberg