Saturday, August 18, 2012

Japan Debt to GDP Approaches 300%!!!

The Atlantic has an interesting article that made my eyes bulge out of my head. Why, it was just two years ago that people were sounding the alarm that Japanese debt to GDP had surpassed 200%. Then, last year, it was 230% over GDP.

Now? Here's an article that is talking about the debt nearing 300% of GDP.

From the Atlantic "Will Japan Become Greece?":

Japan's government has borrowed so much and for so long, without having to pay higher interest rates for the privilege, that we've come to assume it can go on for ever. At the same time, this gravity-defying feat may lull us into thinking that public debt can also rise far, far higher in the US without giving rise to serious problems. James Hamilton links to a study that casts doubt on both points.

As is well known, Japan has benefited from low interest rates despite its high debt ratio because nearly all of its public debt is domestically owned, and its savers are a compliant lot. But as Hamilton explains, a demographic transition is getting under way that will thin their ranks. The study by Hoshi and Ito shows that the household savings rate is going to fall, forcing the government--by this time with a debt ratio approaching 300% of GDP--to borrow more heavily from abroad. The pressure would be worse if interest rates start rising in anticipation of the problem.

Remember, what's not sustainable won't be sustained. 

Read more at Will Japan Become Greece?

I've said it a hundred times and will keep saying it, "Got gold?"


Sebastian said...


Love your blog. One of my favourites. I ahve a few questions if you don't mind answering.

What do you think will be the social consequences when the markets crash in Japan? How do you feel the Japanese people will cope with such adversity? Are you confident that you and your family will be safe there during social turmoil?

I ask because I am considering leaving the UK and returning to Tokyo. I don't feel confident in people's ability to handle a dramatic downturn here. So I'm left contemplating a move to either parts of Latin America or Japan.



mike in tokyo rogers said...

Hi Sebastian,

Thanks. First off I commend you on having the foresight to see what's coming for the west... I left the USA because of the problems that had to do with an unraveling of the social fiber and structure.

I believe Japan will fare quite well during the turmoil. Don't misunderstand, it will be rough on everyone, but you won't see social disorder and chaos like you will in the west.

A good example might be to look at what happened in Japan after WWII: there were no armed revolutions and massive crime... These are things that seem all too common in the west.

I am betting that the Japanese homogenous society and Japanese identity will provide a very safe (at least for family and personal security) place to be when the shit hits the fan.

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