Japan Public Debt 2x GDP With Deflation Threat, NIKKEI Down 75% Since 1990, What If Deflation Invades US

Check out a video update on the Japanese economy reported by Al Jazeera at BondSquawk (hat tip). In summary, Japan has "$9.5 Trillion in public debt", 2x GDP (192% 2009 estimate, #2 behind Zimbabwe at 3x from CIA.gov) with threats of deflation and falling wages. This is after 2 lost deflationary decades and a loss of 75% on the NIKKEI index since 1990 (39,000 to 9,700 today, 1st chart below). The good news is, most of Japan's public debt is held domestically in Japanese Yen. Some analysts believe US Treasuries could end up like Japanese Government Bonds (JGBs) and catch a bid even with hardcore reflationary policies (see David Rosenberg's debate on March, 2010). What about the S&P, would it follow in the NIKKEI's footsteps in a deflationary environment?  Or is the US economic machine too strong for that to happen.

A 75% drop in the S&P from the October 2007 peak would be around 400, which is David Tice's S&P target. What are the odds. Paul Krugman had an op-ed in the New York Times today titled The Third Depression. Hopefully Gold and the S&P move in tandem from here if more $ printing is coming. The 10-Year US Treasury Note is trading at $122 resistance in an ascending triangle (Chart 2) and I'm going to see what happens with the $USD at its 50 day moving average tomorrow.

Nikkei 225 (^N225 - Japanese Stock Index) - Courtesy of Yahoo Finance

10-Year US Treasury Note Price (Stockcharts.com)

(Source: Al Jazeera TV)

Recent posts:
Japan Deflation vs. U.S Today (Nasdaq v. Nikkei Charts)- 6/3/2010
Mish and Marc Faber Believe Japan Is Undervalued, But Preparing For Doom - 3/15/2010