Why investors must beware Japan's ticking time bomb

Investors attracted to Japanese government bonds (JGBs) should think twice before buying because of the risk of price deterioration in the coming years, warns the Stonehage Group.

The multi-family office for ultra high net worth investors said Japan's debt-to-GDP ratio is 220%, almost double that of Italy. However, the Japanese bond market has not behaved in the same way as in Europe, as domestic investors continue to prop up the country's bond market. Anticipation among investors of a transition to a more externally-funded system has prompted many investors over the years to consider shorting JGBs, yet prices have continued to rise and yields have fallen to very low levels. Ronnie Armist, executive director at Stonehage Investment Partners (SIP), said: "Hig...