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Japan's high Debt-to-GDP Ratio - Printable Version

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Japan's high Debt-to-GDP Ratio - RinNatsume - 25.08.2016 11:01

http://www.japantimes.co.jp/opinion/2016/08/25/editorials/japans-shaky-fiscal-consolidation/#.V77AZvl97IU

So many people in this days warn so much and are alarmist on the economic condition of Japan. People are worried on the high Japan's GDP-to-debt ratio which stands at 229.2% of Japan's GDP. This is exacerbated by the Tohoku earthquake and tsunami which the government is to make reconstructions increasing the budget shortfall. Also, a lot of people are worried on Japan's decreasing birthrate that the decrease of population might have severe consequences on Japan's fiscal and monetary economy.

On the people here, what is your reaction and comment on the fact that Japan has the highest GDP-to-debt ratio in the whole world at 229.2%? Is this debt different from other countries in particular such as Greece, US or UK? What is the nature of this debt?

I know the MMT stuff that government deficit = private sector surplus and savings and that the government does not "to pay all the debt" as in old-minded economic concepts, but the debt of Japan at 229.2% seems a special and unique situation compared to other countries.


RE: Japan's high Debt-to-GDP Ratio - Ajay Alcos - 07.09.2016 08:30

RinNatsume Wrote:
http://www.japantimes.co.jp/opinion/2016/08/25/editorials/japans-shaky-fiscal-consolidation/#.V77AZvl97IU

So many people in this days warn so much and are alarmist on the economic condition of Japan. People are worried on the high Japan's GDP-to-debt ratio which stands at 229.2% of Japan's GDP. This is exacerbated by the Tohoku earthquake and tsunami which the government is to make reconstructions increasing the budget shortfall. Also, a lot of people are worried on Japan's decreasing birthrate that the decrease of population might have severe consequences on Japan's fiscal and monetary economy.

On the people here, what is your reaction and comment on the fact that Japan has the highest GDP-to-debt ratio in the whole world at 229.2%? Is this debt different from other countries in particular such as Greece, US or UK? What is the nature of this debt?

I know the MMT stuff that government deficit = private sector surplus and savings and that the government does not "to pay all the debt" as in old-minded economic concepts, but the debt of Japan at 229.2% seems a special and unique situation compared to other countries.


http://www.forbes.com/sites/mwakatabe/2015/01/18/japans-fiscal-situation-is-not-as-bad-as-many-assume/#1e7ca5987661

This article may be nearing two years old but pretty much sums up the fiscal situation in Japan. Unlike say Greece, Japan's debt is mostly tied to government held/tied financial equivalents such as its assets and bonds. If you also take into the account those so called "zombie firms" that the Japanese government has been forced to subsidise (so as to prevent mass lay-offs), buying up its public debt in return; then as one would deduct its public debt is of a far lower severity.

It is not however a healthy state of affairs, as it is a signifier of the poor state of the Japanese economy. In purely macroeconomic terms, Japan is in dire need of reform (educational, economic and social) because internally, there is an utter lack of competition ranging from enterprises to even gender/social class. Heck, various conglomerates in Japan utterly dominate their respective industries (SEGA for video-games, Sony for electronics, Toyota for car manufacturing, Mitsubishi for manufacturing in general, Asahi for beer Big Grin) and laws governing competition, regulation aren't helping garner any competition externally, not least internally.

From a demographic point-of-view, social and cultural factors are also having an growing negative impact on Japan's economic performance. The lack of worker protection for women and the expectation of women to leave their jobs upon motherhood is obviously not helping when coming to terms with its labour shortage. Also overseas foreign workers from around the world seem to be locked towards working in certain industries (Foreign workers from English-Speaking countries become English Teachers, Filipinos in shipping and house cleaning/maintenance, Chinese in hospitality). Thankfully Japan is steadily opening up its labour market for foreigners and as a result will most certainly bump competition amongst the workforce.

To sum up (even though I'm certain to have left other equally important factors) Japan needs to remove itself from its seclusive sakoku like mentality in regard to economics and social emancipation for it to actually regain its economic momentum and potential. Opening up its markets further to external and even internal competition is simply not going to fix Japan's problems altogether, it also equally needs to invest massive resources towards social well-being by building child-care facilities, improving maternal-paternal leave policies and enacting solutions to encourage child-bearing as has been implemented in many other developed countries; most notably France.

Either that, or potentially get swallowed up by a hungry Chinese dragon along with the rest of the Orient Surprised