Japan continues to defy hedge fund bears

Hedge funds have long been fascinated with Japan’s large and growing public debt burden but shorting the country continues to be a losing proposition. Any Japan trade needs to be tightly hedged.

With a debt to GDP ratio of more than 230%, a persistently strong currency and an ageing population, Japan appears to be headed for the mother of all economic catastrophes.

Yet hedge funds, which bet that Japan’s enormous debt burden would eventually cause bond yields to soar and lead to a devaluation of the yen, have been repeatedly disappointed.

Shorting Japan has been a losing proposition for years. Despite a deteriorating economy and worrying demographics, yields on 10-year Japanese government