RE: re: Yen still overvalued\Japanese "Keynsianism"

["Forstater, Mathew" <ForstaterM@xxxxxxxx>]

I am also no student of Japan! (who is, anyone here...there were some
East Asia watchers down under, no...Rob?)

Anyway, one thing I can say is that the idea of downgrading Japanese
sovereign debt (as Moody's has already done and is considering doing
again) is another case study in misunderstanding modern money.

The ability to service its own yen-denominated debt is in no way
compromised by the size or persistence of Japanese deficits.  The
ratings agencies are rating default risk here.

Private debt, or governments on a gold standard or running a currency
board or with a fixed-exchange rate, or debt denominated in a foreign
currency are all different matters, but home currency denominated debt
issued by sovereign governments that operate with floating exchange
rates are not in danger of default.

That doesn't mean that deficits may not cause other problems or
sometimes be too big, or that a government may not ever choose to
default (be unwilling to pay as opposed to unable to pay).  But if
Moody's or any other rating agency believes Japan might choose to
default, it should provide some evidence in support of this belief.  As
it stands now, it appears that Moody's is simply not understanding the
special case of sovereign debt in a modern (flexible exchange rate)
system.

Mat