Forget Europe: Is the Real Debt Crisis in Japan?
By Anthony Fensom
October 30, 2012
While the world worries about Greece and Spain, Japan also has its share of debt problems. Are financial markets missing the real problem?
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.