3 ms·
Not sure why you downvoted my post. At 300% of GDP, Japan is the most indebted country in the world and essentially bankrupt (Greece is at 180%). The governmen
by jazzyk 11y ago
Not sure why you downvoted my post. At 300% of GDP, Japan is the most indebted country in the world and essentially bankrupt (Greece is at 180%).
The government has a mountain of debt (300% of GDP) which it mostly owes to the people of Japan. Debt means the money has been spent, but -at maturity- the money needs to be returned to the lender (not all of them at once, of course).
But Japan does not have money to reduce the debt so keeps servicing the debt by artificially lowering borrowing costs and just finding new lenders to pay off former lenders. In case the Japanese find better safe places to park their money, borrowing costs will go up, causing the debt to balloon, and may cause financial meltdown.
This has been going on for the past 20+ years resulting in stagnation in Japan.
- Retric 11y agoJapan's debt has been sold at generally less than its inflation rate for a decade, making servicing costs essentially below zero over the last decade. While that may not be stable, you can't get into a debt spiral with a negative interest rate. That said, they have been running large deficits for a long time which is a separate issue.
- jazzyk 11y agoAt some point, borrowing costs will rise and then they are in big trouble.
- Retric 11y agoPerhaps, it's an odd situation. If you exclude the Bank of Japan's holdings Japan's debt to GDP ratio is ~70%. It's as if the FED used QE to increase the money supply and ended up owning most US public debt. Sure, on paper it would look bad, but there would be nobody to pay back that debt to.