We can all breathe a sigh of relief that the world is not going to come to an end as a result of a default by the US government. Well, for now, anyway. But this does not mean that debt problems have gone away. Indeed, across the Pacific a serious debt problem is still building in Japan.
Whereas the US debt crisis has been triggered by a disagreement between Democrats and Republicans over the role of the state in the economy and society, and specifically over "Obamacare", Japan's debt problem is a slow burner.
As a share of GDP, government debt has been growing since the early 1990s. This is the result of the long-running weakness of economic growth, repeated fiscal stimulus packages and a long period in which the overall price level has stagnated or fallen. Japan has managed to muddle through, but it now looks as though it is close to a tipping point. The scale of the problem is staggering. Japan's net government debt is about 140pc of GDP. This is way ahead of the US, which is on 87pc, and not that far below Greece. What's more, it is easy to see the ratio increasing further. The IMF expects net debt to rise to 148pc of GDP over the next five years. In fact, if the economy performs badly, inflation remains low or borrowing costs rise, debt could easily follow an explosive path, with the ratio quickly rising towards 300pc of GDP.
Source:Telegraph.co.uk
NewsOnJapan
