Forget Europe: Is the Real Debt Crisis in Japan?
Image Credit: Wikicommons

Forget Europe: Is the Real Debt Crisis in Japan?


Predictions of the date may differ, but the general consensus on Japan remains the same. In a matter of just three to 10 years, the world’s third-biggest economy may start running out of the savings needed to fund its massive public debt.

Is it time to start selling yen, or are the doomsayers off target concerning the world’s biggest creditor nation?

The days of Tokyo’s finance mandarins being admired for their fiscal prudence are long since gone.

According to the International Monetary Fund, Japan’s general government debt first broke above 100 percent of gross domestic product (GDP) in 1997 as the authorities tried to pump prime the economy out of its post-bubble funk.

Ending the credit binge – and its famous “bridges to nowhere” construction projects – has proved challenging for governments dealing with a deflationary downturn, rising welfare costs and dwindling tax revenues.

In 2011, general government gross debt totaled nearly 230 percent of GDP and is projected to reach 245 percent in 2013, with the government’s fiscal deficit currently around 10 percent of GDP.

Net public debt, which subtracts from gross debt government assets such as public pension funds, has also increased tenfold over the past two decades to reach more than 125 percent of GDP.

In comparison with Europe’s indebted economies, Greece reached crisis point with its debt to GDP ratio of just 150 percent, while the Spanish government has faced a storm with a debt ratio below 100 percent.

Prime Minister Yoshihiko Noda, the first leader since Ryutaro Hashimoto in 1997 to raise the sales tax – Hashimoto’s move cost him his job – has already sounded the alarm.

“The European debt crisis is definitely becoming something that is not just someone else’s problem,” Noda has said. “We’re aware that it’s an urgent situation and want to explain that properly to our countrymen.”

Despite the urgings of economists and finance bureaucrats, it took a bruising political battle for Noda to succeed in pushing through a consumption tax hike seen as barely containing projected growth in welfare spending.

The increase in the consumption tax to 8 percent in April 2014 and 10 percent in October 2015 received approval in August, but Noda was forced to pledge to call fresh elections “in the near term,” a vow that the opposition has used to block a key debt issuance bill in hope of forcing elections by year-end.


[...] news too. Yet it is nowhere to be found. For over fifteen years, pundits have been predicting an imminent sovereign debt crisis – which would be manifested in rocketing bond yields, as has been observed in [...]

Kenn Johnsen
January 16, 2013 at 10:26

Lots of so-called intellectuals her claiming printing money is the solution and inflation is good, deflation is bad, insane, anyone wonder why it is all going bad since we got all those college boys?

January 14, 2013 at 05:10

The Internet has educated the downtrodden in the so called third world countries to the lavish lifestyles of the average families in the western world
Wanting to better there downtrodden lives they realise
We need there low price goods to finance our better lives
Now the mouse is chasing the cat
Inevitably as they increase there earnings
Our earnings will decrease
As they( china brazil Indonesia India ect) get wealthier
We all will get poorer
When our governments can’t finance there overspending no more. ( less than 10 years away)
Our lives will never be the same
Our country is blighted by lazy benifit people
Who think hard work is opening a tin of beans without
A ring pull
Girls who have kids to anybody who will plant the seed of life in them so they can just leed a life of benifits
Kids who grow up with no concept of hard work
God help us

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