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Germany or Japan - The First Domino to Fall

The German government is in process of approving a bailout worth $9Bn for Uniper, one of the largest energy companies in the country. The scenario of a bailout has arrived after the gas supply is becoming difficult to source even after paying higher prices. That is why the government is deciding to provide a bailout and introduce a law to do more of the same if needed.

On the other end of the world, Japan continues to face large currency risk with its energy imports seeing a price rise of 70% as compared to last year post combination impact of market and currency change. This is leading to many industries, especially chemical companies issuing a price hike warning that will last through 2023.

All these issues are resulting in data releases that have not been witnessed in decades. For example, Germany posted a trade deficit after 30 years and Japan has spread the highest number of items since 2001.

The problems that are occurring right now are having an impact not only limited to individuals and corporates but on the country as a whole. And as history has become relevant, these problems are stubborn, meaning they will only reverse either the demand gets crushed by a large recession or the cost of one unit becomes unaffordable to the majority.

So who falls first? Will it be Japan that faces a stronger inflation problem that is quicker to impact or Germany that faces a stronger recession problem that is slower to impact?


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