Obama Bonds to Give Buyers Taste of Japan Lost Decade

The U.S. is starting to look like Japan in the 1990s, when the Bank of Japan struggled to revive growth as the combination of deflation and recessions stranded the nation in the so-called Lost Decade. Yields on Treasuries are falling as the government sells a record amount of debt to prop up the American economy. Two-year note yields have fallen to 1 percent, compared with 0.57 percent for Japanese government bonds of similar maturity. The gap last week touched the narrowest since 1992.
Bando bought Treasuries, as did Mizuho Asset Management Co., which oversees $41.9 billion and bet all year that inflation in the U.S. will turn into deflation, buoying government debt. JPMorgan Asset Management Japan Ltd., part of the largest U.S. lender, is buying Treasuries, speculating the Federal Reserve will purchase the securities to keep yields down and spur the economy, just as the Bank of Japan did a decade ago.
Commercial banks may also buy more government debt, they said. Since 2000, Japanese banks increased their holdings of the nation’s bonds to 20 percent from 9 percent of total assets, Jen and Andreopoulos wrote. U.S. banks have about 10 percent of their assets in government securities, down from 20 percent in 2003.