C. Nowell,
"C." is short for "Comrade." I found that leftists balk at being called "Mr." or "Ms." and scolded be when I would address my responses in that way, so I had to come up with some other form or address. I feel a little formality is always a civilizing influence.
As for the yen question, I admit it is complex but I would say two things. According to remarks made by the BOJ governor, several Japanese banks have probably already violated the capital adequacy ratios required by the Bank for International Settlements. Apparently the Bank for International Settlements are not as diligent as they might be. That, coupled with notorious Japanese under-regulation, mean pressure on Japanese banks to maintain reserves is not acute. It's true that the Japan premium has risen, but we have to believe this is based on estimates of capital adequacy rather than hard numbers, since hard numbers seem to be almost nonexistent in Japan.
For the Japanese to get bad loans off their books, they are going to have to securitize. Securitizing debt is quite new to Japan and securitizing real estate debt is extremely difficult because of Japanese laws on taxation, bankruptcy, foreclosure, etc. It's also hard to create a market for securitized debt when numbers are sketchy and the economy is bad. I think whoever can figure out how to securitize Japanese debt (and sell it, of course) will create a virtual fountain of cash.
On the securitization question, I have been debating with myself whether the high Volcker interest rates helped the contemporaneous securitization trend or hurt it. I think a prolonged, falling interest rate environment (prompted by such draconian interest rate rises) may have made people more willing to buy sub-"A" debt. On the other hand, A super-low interest rate environment (as in Japan) might allow secutitizers to offer interest rates that are both comparatively high and reasonable enough not to endanger the economies underlying the securities. Of course the fact that Japanese interest rates have nowhere to go but up means buyers of bonds can't expect much capital appreciation.
As the Aussies ask: "Whaddaya reckon?"
peace