The Great Japan Trade That Everyone's Been Waiting For Still Hasn't Happened

We've been writing so much about Japan, and the decline of the yen and so forth that you might be mistaken if you thought that the great "Japan trade" that hedge funds have been waiting around for years to play has become reality.

The answer is: Not really.

As Richard Barley at WSJ's Heart On The Street notes, the real "widowmaker" is shorting Japanese Government Bonds. That's the big kahuna trade that folks for years have been expecting will one day create some trader untold fortunes. You know the theory: Japanese government debt is over 200% of GDP, and one way those bonds will explode in the Keynesian endgame.

Sure, some traders have made a lot of money on the decline in the yen, but the Nikkei has been on a tear, and this isn't actually the hallmark of an economy going into a watershed collapse.

And in the meantime, Japanese bond yields have been pretty flat.

So remember, for all the talk about the big turn in Japan, the core idea that people have had for a long time still hasn't come to fruition.