Japan's Growing Sovereign Debt Time Bomb

[marmar]

from Der Spiegel:


The eyes of the financial world are on Greece and other heavily indebted euro-zone countries. But Japan is in even worse shape. The country's debt load is immense and growing, to the point that a quarter of its budget goes to servicing it. The government in Tokyo has done little to change things.

Today's Tokyo has become a permanent mecca of consumption, its boroughs seemingly divided according to target markets. The city's Sugamo district, for example, is dominated by the elderly. Escalators in the subway station there go extra slow, while the stores along the Jizo Dori shopping street offer items such as canes, anti-aging cream and tea for sore joints. The Hurajuku neighborhood, on the other hand, is teeming with fashionistas made up to look like Manga characters.

This world of glitter, however, is but an illusion. For years, the world's third-largest economy has been unapologetically living on borrowed cash, more so than any other country in the world. In recent decades, Japanese governments have piled up debts worth some €11 trillion ($14.6 trillion). This corresponds to 230 percent of annual gross domestic product, a debt level that is far higher than Greece's 165 percent.

Such profligate spending has turned Japan into a ticking time bomb -- and an example that Europe can learn from as it seeks to tackle its own sovereign debt crisis. Japan, the postwar economic miracle, has never managed to recover from the stock market crash and real estate crisis that convulsed the country in the 1990s. The government had to bail out banks; insurance companies went bust. Since then, annual growth rates have often been paltry and tax revenues don't even cover half of government expenditures. Indeed, the country has gotten trapped in an inescapable spiral of deficit spending. .....................(more)

The complete piece is at: http://www.spiegel.de/international/world/massive-japanese-sovereign-debt-could-become-global-problem-a-875641.html

[bluestate10]

1. What is your purpose for posting this stuff?

I am not auguring the validity because the news source is a good one. But, to post something without a moral is a waste of time.

[marmar]

2. WTF are you talking about?

Without a moral?..... It's a news article.

[Speck Tater]

4. WTF? Since when is posting informative information a waste of time? nt

[marmar]

5. Exactly what I was thinking......This place can be bizarro world sometimes.

nt

[Speck Tater]

3. Interesting quote from Kunstler...

In his latest blog post he talks about Japan's dilemma and concludes:

My own view, expressed here before, is that Japan is on a fast track to become the first advanced nation to opt out of industrialism and go medieval.

On Edit: link: http://kunstler.com/blog/2012/12/forecast-2013-contraction-contagion-and-contradiction.html

[HiPointDem]

7. Most of Japan's debt is borrowed from its people rather than from financiers. That's the main

problem in a lot of people's eyes.

Take kunstler with a spoonful of salt.

"An economy with its own currency can sustain very large debt loads without prompting a crisis. And an economy with its own currency and a persistent current-account surplus can flout every last bit of conventional debt wisdom and still avoid crisis."

Japan has control of its own currency. It can run into other problems (like financial attacks from other countries that don't like what it's doing, and they apparently don't) -- but the repetitive attacks on its debt load are misleading.

[HiPointDem]

6. This is the boilerplate from the US/West. They've been predicting Japan's demise because

of sovereign debt (borrowed from its people rather than banksters) for years.

They'd rather the japanese borrowed from the banksters, that's all.

And the new guy that was just elected is going to do some things the banksters aren't liking much. Stay tuned.

Even though Japan's debt is more than twice its GDP (about three times the size of the U.S. debt), there is no risk of default since its debt is in its own currency. In this way Japan is like the United States and the United Kingdom, and unlike Greece and Ireland.

In the worst case scenario, Japan or the United States would print lots of money and see inflation. Given that Japan has been flirting with deflation for almost two decades this doesn't seem like a plausible scenario, but in any case it is not the story of Greece being held at the mercy of the bond vigilantes who will not buy its debt.

Read more: http://www.businessinsider.com/everyone-should-read-floyd-norris-2011-3#ixzz2Gyoz6jTX

Japan borrows from its people at a low rate & lends to the US at a higher rate. It uses the spread to make money & repay its people.

[Bonobo]

8. Avg. Japanese still has a shitload of savings compared to Americans. nt