Insight: Japan slowly wakes up to doomsday debt risk

Comments (10)
WeWereWallSt wrote:

“But to some economists who have followed Japan for years, the frustration is that the country has yet to solve its underlying problems of slow economic growth and stubborn deflation.”

Those aren’t the stubborn underlying problems of Japan. Japan’s stubborn underlying problems are:

(a) the Old Boys. They’re fossils. They are way past their prime and ought to go. (http://www.WeWereWallStreet.com/Olympus-Senior-Citizen-Problem.html – satire). They caused the mess, have had two decades to resolve it and have failed, and ought to be on bus tours now instead of still “running” the place.

(b) Cultural impediments to young men and women stepping in to fill the gap. These begin in youchien, nursery school, so may be hard habits to break. Young men waste their best years under Japan’s seniority system and women waste their whole lives under a chauvinism that most of the rest of the world, including many Asian neighbors, have done away with over the past 40 years. It’s time.

(c) Xenophobia. The country needs foreigners with bright ideas and good work ethic. Put aside North Korea and Cuba, two countries with whom one really doesn’t want to be compared, there is probably no other country in the world more insular. This problem makes (b) look easy.

Do (a) and (b) and you can drag your feet on (c), but the Old Boys have to go.

Feb 17, 2012 6:44am EST  --  Report as abuse
gordo53 wrote:

Japan’s debt stands at roughly 2 times gdp. This massive debt has been financed largely by the Japanese themselves. Now, with a stagnant, aging population Japanese seniors are withdrawing their money to sustain themelves in retirement. As one widely read analyst has put it, “Japan is a bug in search of a windshield”. As with most heavily indebted nations, there is no easy way out. In Japan’s case, even default is not an option given that it would be on the backs of their citizens. We may soon find ourselves talking about Japan in much the same way as recent discussions on Greece. Unlike Greece, Japan is the world’s third largest economy. A collapse would have serious implications for us all.

Feb 17, 2012 8:38am EST  --  Report as abuse
billt568 wrote:

Kyle Bass has been on about this for years. If their talking about it, its getting worse.

Feb 17, 2012 9:31am EST  --  Report as abuse
Harry079 wrote:

I hope after they have their Geritol they put in a call to the Sleeping Giants on Capital Hill.

Feb 17, 2012 11:19am EST  --  Report as abuse
2ndand15 wrote:

“There’s a sucker born every minute.”

This article is a sad if not pitiful example of an absence of the most basic elements of critical reasoning.

Japan’s national debt figure is high due to of its structural excess savings – The Japanese corporate sector and households are in huge surpluses – its corporations is sitting on over 2.6 trillion dollars in cash, its household is sitting on over 15 trillion dollars in cash; it is the world’s largest net creditor nation with over 3 trillion dollars in NIIP; its government directly controls the world’s largest deposit bank and insurance company.

Basic logic implies that for Japan’s private sector to run such huge surpluses counterparty has to be on the other side of the ledger – and that happens to be the Japanese government. Additionally, Japanese mega banks (arguably the most well-funded ones in the world) have trillions of dollars of excess deposits sitting there with nowhere to go (because the private/household sectors are flush and lack of domestic investment opportunities), so they purchase JGBs are laughing all the way to the bank (pun intended). And finally, due to BOJ’s asset buying program, the Yen is now weakening significantly, which will accelerate Japan’s return to a healthy trade surplus this year.

Feb 17, 2012 11:19am EST  --  Report as abuse

Don’t forget what Mother Nature’s very overdue hiccups can instantly do to the planet’s economic system:
* A huge earthquake that destroys Tokyo;
* A super hurricane that destroys New York and Wall Street;
* A zipper quake along the West Coast of America, especially California, which collapses Silicon Valley, L.A.’s port facilities, Seattle’s Boeing and Microsoft facilities;
* A lethal pandemic that sweeps the world, again wiping out one third or more of the planet’s human population, particularly the young and old.
* A super volcano and accompanying city-destroying tsunamis in various locations around the globe; not to mention the onset of another worldwide crop destroying mini-ice age as the planet cools.
* Etc., etc, etc.
We have been lucky Mother Nature has been quiet for as long as most of us and our grandparents and great grandparents can remember, but these calamities are overdue and will occur: When, we don’t know, but probably within our short lifetimes, beginning now.

Feb 17, 2012 1:11pm EST  --  Report as abuse
revelo wrote:

2ndand15 is the only commentator here with any sense. Soaring borrowing costs and tanking currency would mean soaring corporate profits, thus soaring corporate income taxes, and soaring prices, thus soaring sales taxes, and soaring wages, thus soaring personal income taxes. Basically, if and when demand picks up in Japan, the existing tax system will automatically siphon off the excess demand, causing huge budget surpluses with which to pay down the debt. All that has happened over the last 20 years is that the Japanese people have accumulated huge stockpiles of promises (bonds) that can never be redeemed at full value (after taking taxes and inflation into account) and everyone knows this. People continue to add to their stockpiles because partial redemption of a huge stockpile is better than not having a stockpile at all. The people who should be worried are American or European businesses with Japanese competitors. At some point, the yen will fall substantially, giving these competitors a leg up.

Feb 18, 2012 12:44pm EST  --  Report as abuse
nieldevi wrote:

These statements, like the anonymous “official” in the story, all reek of some extreme ill-considered desire to over-state the current state of affairs in Japan. Yes, there is an enormous debt deficiency. Yes, the “filial piety” system is antiquated. Yes, there is a resistance to import wholesale labor (mostly because it is not necessary, as Japan does most of it’s manufacturing off-shore). The point being is during all of these 20 years of slow economic growth (like that is not really an indicator of success), the standard of living and modernization of Japan has been growing. The culture is strong, proof of which is the unity and civilized manner that people have handled the multiple disasters and recovery. You may not understand it, or you may not approve of it, but it worked.
If you are “frustrated” by Japan, consider that they may be “frustrated” by your silliness and excesses, especially your manipulation of markets and currency games.

Feb 20, 2012 4:07am EST  --  Report as abuse
VonHell wrote:

…with long life time expectative…
According to last estimatives all over japanese media today: By 2060, 40% of japanese population will be in retirement age… not 40% of the working class, but of all population… that would put the FOBAR ratio of 1.2 working to 1 retiree today to what? 1 working to ~2-3 retiree?
And the population will shrink from actual ~125 million to ~86 million… like if a city of one million vanishes each year from the economic scenario…
Yeah… the economy will grow marvelously… if you see things with resiliense of long past decades… painted on contact lenses… what the article is all about…
If the debt in the last year grew from11 to estimated near 13 tri in march, how long until passes the household savings? 3, 4 years?
Companies sitting on piles of money? The same facing the record defict trade posted this month, strong yen, high cost japanese labour, record losses, better and more competitive chinese and korean competitors or complaining about the eletricity bill rise by TEPCO?
PM Noda said Japan would have “no future” without the sales tax hike… dramatic? No.
This doenst look something that the great patriotism (with their bank savings) of the people or the even greater blindfolding pride of its old politicians can solve when the time comes.
Last decade was the decade of stagnation, this one will be of something different… sad but beautiful to see.

Feb 20, 2012 4:44am EST  --  Report as abuse
WJL wrote:

America should follow Japan and also introduce a 15% VAT to solve it budget deficit.

Feb 20, 2012 4:58am EST  --  Report as abuse
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