Told You So: Japanese Government will Resort to Deposit Confiscations

Japanese authorities has been reported as now considering deposit confiscation. Yet this serves as another I told you so moment

Here is what I wrote early June:

And given the constrained options of the Japanese government, I think that they could or most likely resort to the Cyprus bail-in model. They may be targeting part of the ¥1,230 trillion for bank deposits haircuts. Poor households

Writes the Zero Hedge: (bold highlights original)

As Nikkei reports, Japan's Financial Services Agency will enact new rules that will forced failed bank losses on investors, if needed, via a mechanism known as a "bail-in."

The FSA report also notes that Mitsubishi UFJ (MTU), Mizuho Financial (MFG) and Sumitomo Mitsui (SMFG) are among those proposing amendments to allow them to issue the types of preferred shares or subordinated bonds that would be used in such cases.

So not only will Japanese banks suffer VaR shock-driven needs to reduce JGB holdings but a weaker deposit base will further exacerbate the delveraging.

Abenomics has essentially underwritten economic Japan’s death warrant. Expect more pressure on Japan’s banking system.