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Their population will drop. Each couple only has something like 1.2 kids. Lack of people to pay down their debts will be the long term problem.

tonyedgecombe 6y ago
Most of the debt is held by the Japanese themselves. They control their own currency. It isn't likely to be a problem for them.
- mathattack 6y ago
  Even still, the debt is held by people who eventually expect to use it to find their retirements. They can avoid external driven shocks, but at some point a smaller population can’t produce enough care for a larger one. That will play out in the debt markets, either with defaults or inflation.
  - smabie 6y ago
    The BOJ has been trying to raise inflation for like 30 years now and has epically failed. Inflation will not be the problem. The velocity of money in Japan is criminally low.
- cryptica 6y ago
  It is going to be a problem because in an inflationary monetary system, you need to give out loans at a constantly increasing rate in order to pay off the debt of the previous generation. If the new generation is not growing fast enough, they will not be able to afford to take out enough new debt to buy assets from the previous generation (thus allowing the previous generation to pay of their debts from the sale or lease of real estate), then prices could crash quickly when the previous generation starts defaulting on their loans. It's also why real estate prices are so high in Japan. The older generation needs to squeeze out as much as they can from each member of the younger generation since there are so few of them in numbers.
  - freetime2 6y ago
    I’m wondering what you mean by “real estate prices are so high in Japan”? Relative to other countries? Or some point in the past in Japan? My assumption is that declining population is leading to surplus housing and declining real-estate prices in most of the country. And even in the Tokyo area where demand is still strong, homes are still more affordable than in other large cities like New York and London.
    - mathattack 6y ago
      I suspect it’s a historical observation. They used to be crazy high. (I lived in Tokyo over a decade ago. Prices were crazy then, but they’re roughly the same now. Meanwhile SF has gone up at least 3X in that timeframe)
      - tonyedgecombe 6y ago
        There was a boom but this pre-dated the debt issue we are discussing in this part of the thread.
  - kazinator 6y ago
    You can buy a detached house in the Tokyo Metropolitan area for less than a 1 bedroom condo in Vancouver, Canada. An old house for significantly less. This broad observation is easily confirmed by browsing real estate listings. E.g. random hit: small 3LDK house in Kashiwa built in 1981: https://house.goo.ne.jp/buy/uh/detail/4/12217/37091100002300/3709110/x437091100002300.html https://house.goo.ne.jp/buy/uh/detail/4/12217/37091100002300... 6000000 yen ~= $60K USD.
  - mathattack 6y ago
    It’s the opposite, no? In an inflationary environment your debt is worth less. (More money is printed to pay it off) That’s why countries inflate it away.
    - imtringued 6y ago

tonyedgecombe 6y ago

Most of the debt is held by the Japanese themselves. They control their own currency. It isn't likely to be a problem for them.

mathattack 6y ago
Even still, the debt is held by people who eventually expect to use it to find their retirements. They can avoid external driven shocks, but at some point a smaller population can’t produce enough care for a larger one. That will play out in the debt markets, either with defaults or inflation.
- smabie 6y ago
  The BOJ has been trying to raise inflation for like 30 years now and has epically failed. Inflation will not be the problem. The velocity of money in Japan is criminally low.
cryptica 6y ago
It is going to be a problem because in an inflationary monetary system, you need to give out loans at a constantly increasing rate in order to pay off the debt of the previous generation. If the new generation is not growing fast enough, they will not be able to afford to take out enough new debt to buy assets from the previous generation (thus allowing the previous generation to pay of their debts from the sale or lease of real estate), then prices could crash quickly when the previous generation starts defaulting on their loans. It's also why real estate prices are so high in Japan. The older generation needs to squeeze out as much as they can from each member of the younger generation since there are so few of them in numbers.
- freetime2 6y ago
  I’m wondering what you mean by “real estate prices are so high in Japan”? Relative to other countries? Or some point in the past in Japan? My assumption is that declining population is leading to surplus housing and declining real-estate prices in most of the country. And even in the Tokyo area where demand is still strong, homes are still more affordable than in other large cities like New York and London.
  - mathattack 6y ago
    I suspect it’s a historical observation. They used to be crazy high. (I lived in Tokyo over a decade ago. Prices were crazy then, but they’re roughly the same now. Meanwhile SF has gone up at least 3X in that timeframe)
    - tonyedgecombe 6y ago
      There was a boom but this pre-dated the debt issue we are discussing in this part of the thread.
- kazinator 6y ago
  You can buy a detached house in the Tokyo Metropolitan area for less than a 1 bedroom condo in Vancouver, Canada. An old house for significantly less. This broad observation is easily confirmed by browsing real estate listings. E.g. random hit: small 3LDK house in Kashiwa built in 1981: https://house.goo.ne.jp/buy/uh/detail/4/12217/37091100002300/3709110/x437091100002300.html https://house.goo.ne.jp/buy/uh/detail/4/12217/37091100002300... 6000000 yen ~= $60K USD.
- mathattack 6y ago
  It’s the opposite, no? In an inflationary environment your debt is worth less. (More money is printed to pay it off) That’s why countries inflate it away.
  - imtringued 6y ago