Japan's Marshall Plan - Write off US Treasury holdings

A Bloomberg report quoting Akio Mikuni president of the rating agency Mikuni &Co. provides a possible way out of the current mess. While he speaks paricularly with respect to Japan, his suggestions can be implemented by other countries which have a major dependence on US for its exports and are heavily invested in US treasuries. He says

1. Japan should waive or write-off US Treasury holdings as it is likely that US government will find it extremely difficult to service.

2. Given the size of its budget deficit and the potential amount of borrowing it needs to do will put tremendous pressure on the dollar which he sees at 50 to 60 Yen if such measures are not taken.

3. Japan also should invest in the infrastructure, roads and bridges that US plans to help create jobs and support personal spending.

4. Such 'out of the box approach' is only likely to save countries like Japan which are dependent on US consumers. In this sense it is a current sacrifice to protect the long term interest of the Japanese economy.

Sounds very interesting and if implemented could be challenging for Japan (it has $976.9 billion in foreign-exchange reserves). China may be better placed but given the political angle this may not be possible. The US it appears has to be 'doled out' while its government is busy ''bailing out'! Watch out, as any such move may bring life back to the markets.

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