politics

Japan's national debt tops Y1,000 trillion

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And the average, hard working Japanese has no say or influence on the spending. Whether he/she wants more services from the government or less expenditures overseas, his/her opinion is as valuable as the air it takes to voice it. Japan is not the only country with the debt problem, the debt is just smaller. The next election will mean the incumbents are re-elected, and the over expenditure will continue.

5 ( +8 / -3 )

Prime Minister Shinzo Abe’s government is mulling whether to go ahead with a series of sales tax rises that would double the rate to 10% by 2015, a key source of new income but one that some fear would stall his economy-boosting plan dubbed “Abenomics”.

Mulling my arse! Whomever came up with the idea that Abe was "mulling" anything to with the consumption tax increase has their heads buried not in sand but concrete.

I am tired of there being articles and news come out that make it "seem" like Abe is planning to anything different, when the intelligent folks realize that there really is not other choice, cutting the budget along does not do enough to stem the flow of red!

4 ( +4 / -0 )

"Japan has not faced a public debt crisis like the kind seen across the debt-riddled eurozone"

No kidding, Sherlock. And Japan never will, because unlike the Eurozone it has its own fiat currency, and thus the ability to meet its debt obligations, which are all denominated in that very currency. So it's a non-issue.

If there is a debt crisis, however, it would be one deliberately and needlessly engineered by politicians or bureaucrats who are ignorant of how monetary policy works. Like the "sequester" dummies in Washington.

2 ( +9 / -7 )

Well, I can't see any any difference between 220% and 230%... What JeffLee wrote is right.

Plus 80% of that number is in Japanese hands so it's still in Japan.

-2 ( +5 / -7 )

This is so stupid! Japan has this huge debt, but Japan keeps giving BILLIONS and BILLIONS of YEN LOANS to CHINA?? WTF???!!

6 ( +10 / -4 )

That's about 7.92 million yen per capita. When the national budget is more than double the tax revenue the debt will continue to increase.

6 ( +6 / -0 )

If this is true then why are Europe and America nearing collapse with their lesser debt loads? JGBs are a safer bet than Eurobonds, Gilts, or T-bonds.

-8 ( +0 / -8 )

so...1 Quadrillion Yen.

.....

sigh

5 ( +5 / -0 )

"That's about 7.92 million yen per capita"

Only worth worrying about if you believe the taxman will show up on your doorstep one day and demand that every household member pay 7.92 million yen. Never happened and never will. Such a policy would kill consumption and demand and put lots and lots of money in the public sector, where it's not needed.

"If this is true then why are Europe and America nearing collapse with their lesser debt loads?"

America is not collapsing from public debt nor is Germany. Greece is because it's heavily indebted to foreigners and doesn't have enough of the foreigners' currency to pay back the debts. Hence the bailouts. Japan's situation could not be more different.

-3 ( +4 / -7 )

@JeffLee

I just stated the figure as a fact. Don't worry, no taxman will show up.

3 ( +3 / -0 )

Sigh, too worried about paying my own bills right now. I wish Japan or all the countries hated debt like I, and most sane people, do.

4 ( +4 / -0 )

@ jeff198527

JGBs are a safer bet than Eurobonds, Gilts, or T-bonds.

You can make more money in a US savings account then a JGB, and I'm pretty sure a shoebox looks more appealing to investors then JGBs. Japan will not collapse they will simply implode. Once they consume most of the private savings in Japan and have to raise the interest to make it appealing to foreign investors (b/c they will have no choice) that's when it will happen.

8 ( +11 / -3 )

1000 trillion debt!! I wonder when Japan would go bankrupte like Greece? Major countries are keeping a lot of Japanese bonds, Yens,,,,,,. If its bankruptcy happened, then all Japanese currency would be a worthless paper. I wonder how bad it would influence to others? IMFcould help Japan like S Korea did in the past?

3 ( +5 / -2 )

Japan has no real assets like housing or land, so when somebody was borrowing they borrowed in form of other assets. And here lies the mystery of all this, what are these assets? One friend put it this way: Imagine that you want to borrow 1 million dollars to a investor, the japanese bank will ask you for an asset to cover 1 m , and you show up with a 200 years old paper that says your family owns a wooden EDO bridge in Kyoto, which was there 200 years ago . . . . The bank will take this fictional asset as real and put 1 m dollars in a fund. The reason all this isn't collapsing is that no body from the lenders wants to withdaw their investement, nor do they want to take home the gains. Its a giant bubble that can't burst as nobody from he lenders involved will ever panic and make those investement founds unstable . . . Take it as ultimate patriotism.

-1 ( +2 / -3 )

In British English it's 1 Septillion. But, in layman's English it's 'a hell of a lot'! And, Abenomics is going to extend this number? How deep can you dig a hole before the walls cave in? Sadly, I think Japan is gonna find out in the very near future.

7 ( +8 / -1 )

Yet the yields for 10 year JGBs yesterday fell to 0.75%...

4 ( +4 / -0 )

As the population ages, the Government will need to spend more on pensions and healthcare, and traditional JGB buyers like pension funds will be spending on pensions rather than JGB's. Also, a few years down the line, sovereign debt will exceed total household savings. So at some point, it may become necessary to borrow from the international money market. Where the marginal buyers of JGBs are foreign investors rather than domestic Japanese investors, interest rates may increase, perhaps significantly. Even at current low interest rates, Japan spends around 25-30% of its tax revenues on interest payments. At borrowing costs of 2.50% to 3.50% per annum, two to three times current rates, Japan’s interest payments will be an unsustainable proportion of tax receipts. The J Government has a few trillion dollars worth of overseas assets it can sell, and attempts to create inflation could help postpone what is beginning to look like a looming bankruptcy crisis!! ...

9 ( +9 / -0 )

Less than 10% of Japan's Government debt is held by entities outside of Japan. Basically less than $1 Trillion of the total $10 Trillion, is held by foreign entities. The U.S. Government, as of January 2011, also had around $10 Trillion in debt... but $4.45 Trillion of that debt was foreign owed / owned. The significance of this is that Japan's debt, which is over 2 times that of the USA per capita, is largely a Domestic issue and therefore not as well publicized as that of the USA. Currently the BoJ is trying to reduce the Government's debt simply by inflating the economy and weakening the Yen. If the Yen were to go to Y150 to the Dollar, Japan's debt would disappear by more than 30% when valued vs the greenback. And they believe that the weaker Yen would help Japan's exporters. The Government of Japan many years ago pushed for Nuclear power even though the country lies directly above more major faults than any other island in the world and disaster was just waiting to happen. Japan's debt, another ticking time bomb continues on its inevitable course to explosion while all those around gamble that it won't happen before they have pulled their bets.

3 ( +3 / -0 )

so...1 Quadrillion Yen.

.....

sigh

And the Abe administration just inaugurated a new giant helicopter destroyer!

1 ( +2 / -1 )

If more cared more would vote. I have met many who simply say my vote will not make a difference but that is simply wrong.If they want to change they all have to change.

1 ( +1 / -0 )

And the Abe administration just inaugurated a new giant helicopter destroyer!

...which was commissioned by the DPJ back in 2009.

2 ( +2 / -0 )

According to Reuters, the Japanese (individuals) hold 1500 trillion yen in personal assets of which 57% is held in low-yielding bank and postal savings.

0 ( +0 / -0 )

True, roughy 90% of Japan's debt is owned by Japanese. But once they stop buying because they realize they won't get most of their money back, Japan will turn to global markets for funding a larger and larger portion of the debt. And, in time, it is those markets that wil determine what happens to the debt. At some point, the debt becomes unserviceable and will be restructured. Bond holders will be a fraction of what they put in back.....

5 ( +5 / -0 )

This is all a very dangerous situation and the future looks really hopeless for Japan. Sooner or later the country is going to explode. No wonder the country can't attract good foreign professionals, they'd have to be crazy to come. What's the solution here?? There isn't one. Japan is just a sinking old people's home on the way to destruction and nothing can change this.

1 ( +4 / -3 )

Come on use the right denomination. 1,000 trillion is 1 Quadrillion. And, I think there is a punctuation mistake, should it be 1,008 trillion not 1.008 trillion. 1,008 trillion yen is equal to 10.46 trillion dollars at the current time. If they change the trillion to quadrillion, it would be correct. And what's a 40 billion difference anyway. Japan's average interest rate is 3.22% and the highest was 9%, currently at 0%. So with pension funds getting out of bonds, what is going to happen to interest rates and the Japanese debt?

0 ( +0 / -0 )

There is no such thing as "Abenomic miracle".

The real hard fact is that Japan's economy is getting better due to Japan's export to China is getting back to pre-Diaoyu islands conflict as time gradually passes.

Japan's export driven economy is much more dependent on China's and not vice versa.

4 ( +4 / -0 )

This article had left out the Municipal debt of another 200 trillion Yen, if added to the total One Quadrillion yen this would take the total debt to 250% of Japan's economy produces per year. This is a staggering high level of debt.

3 ( +3 / -0 )

We're number one! Or should I say "one trillion"!

2 ( +2 / -0 )

So I'm guessing Abenomics still hasn't delivered?

2 ( +2 / -0 )

Ops, I meant to say "We're number one-quadrillion!"

0 ( +0 / -0 )

Japan's debt situation is a little unique. Most of the debt is domestically held, but that has only given the government more excuse to spend heavily. Were a larger percentage of debts foreignly held, these investors might require Japan spend more sensibly before these investors bought J-bonds. A couple of other issues which add to the problem are that Japan has no natural resources to sell to pay down this debt, and that Japan's ever decreasing and less productive population will make it less and less possible to pay down the debt in the future.

At the moment, Japan remains a creditor nation, as it holds a great deal in foreign bonds and investments, but the value of these holdings continues to diminish as the national debt increases.

Increasing inflation would relieve some of the burden of the debt, as the debt is not tied to the rate of inflation. But the act of raising inlflation by printing more money to buy more J-bonds counteracts the diminuation from inflation. Borrowing money to pay down debts does not really reduce debts, does it?

Increasing the consumption tax by any amount will reduce revenue, not increase it. Japanese do not pay the same level of taxes which are levied in Europe, but the median income of the Japanese is smaller, and staples like food cost double what they cost in America or Europe. The Japanese already have little-to-no disposable income, and an increase in tax will only result in a decrease in spending, which will further decrease an already shrinking economy.

-1 ( +1 / -2 )

one an average debt on a new born baby in Japan comes to 20 Million JPY (if we exclude population of pensioner) and increasing. What kind of developed nation is Japan? Soon people will start eating concrete in place of Rice !!!

0 ( +0 / -0 )

Dang, that's like half my salary.

-1 ( +0 / -1 )

It should be added that 230% debt to GDP ratio is nonsense. If you net off the governments assets, it is more like 110% Those assets are the government corporations set up after the war that were privatized in the 90s. Like the train system, Japan Salt and Tabacco, lots of property, etc. etc. etc. There are dozens of these former government corporations, and the government still has 51% of the stock. Walk around the streets of Tokyo and see if anyone is panicking. We know the actual situation.

-4 ( +0 / -4 )

Fiscal debt is not the same thing as private debt, and that's a fact, Jack. Households can't issue bonds or print their own currency to meet their debt obligations. Look it up.

Fiscal debt is debt, nonetheless. Households can't issue bonds, or print money, they simply borrow more money, which in effect is the same thing. Nearly one third of the tax revenue now collected by Japan must be spent to service debts, and, as the debt continues to rise, and revenue continues to sink, this number will only grow. Great numbers of people are entering retirement, and will begin collecting their pensions, and the increasing cost of their healthcare will begin to weigh more heavily on what little revenue remains. Fewer people are being born, entrepreneurship in Japan is almost nonexistent, and larger companies are gradually shifting their focus overseas, yet Japan continues to spend like a drunken sailor.

The only reason that JGB's have been seen as safe is because Japan itself holds a great deal of foreign bonds, and these are seen as a good hedge. But if the worldwide bond market were to collapse, JGB's would be among those hardest hit. America has the resources to be self-sufficient, as does Europe, to a lesser extent. Japan is not so fortunate.

1 ( +3 / -2 )

Walk around the streets of Tokyo and see if anyone is panicking.

I think it would be better to walk around the countryside or industrial areas to see the real situation. Economic centres like Tokyo, New York, London etc. generally are the last to look like they are feeling the effects of a decline but if you go to countryside and industrial areas you will see how hard things have become. Most small towns in Japan have main streets that are full of shops that have been closed down for years, for obvious reasons this is not likely to happen in Ginza or Shibuya. The look of the capital city is not a good indicator of the economic health of the entire nation. I think if you go to rural areas you will see that people might not be panicking yet but they are indeed very worried and generally pessimistic about the good old days ever coming back.

If you net off the governments assets, it is more like 110% Those assets are the government corporations set up after the war that were privatized in the 90s. Like the train system, Japan Salt and Tabacco, lots of property, etc. etc. etc.

And what is the real value of these assets as opposed to the paper value?

2 ( +2 / -0 )

Now you know why the Japanese government has been keeping bank interest low or at zero. That way they pay a lot less on their bond borrowings. Just imagine if the interest rate is allowed to go up how much more bankrupt the country would be. When bond falls due for redemption what happens? Abe and Kuroda simply print more money. That's as easy as A, B, E, K.

1 ( +2 / -1 )

@Paul J During the 90s finance writers wrote about the completely irrational distribution of assets in Japan, by which they meant the huge transfer of wealth from the city to the countryside. Then PM Koizumi stopped it, and predictably all those mom and pop shops with no customers that stayed open on government subsidies closed up. And as you say, there are all those shuttered shopping streets in the countryside. Now these same people say Look at the shuttered shops in the countryside! Japan is dying! Everyone wants it both ways. Or: Japan is what you choose to see in it.

1 ( +1 / -0 )

"There isn't one. Japan is just a sinking old people's home on the way to destruction and nothing can change this."

Not as long as AKB48 is around!

"Dang that's like half my salary"

You wish, SuperLib.

2 ( +2 / -0 )

Daijobu....Ganbare Nippon, Ganbare Abenomics (!)

-4 ( +0 / -4 )

One thousand trillion... is that like a zillion?

1 ( +2 / -1 )

Japan has not faced a public debt crisis like the kind seen across the debt-riddled eurozone

optimistic view, are we going to relax now and not worry anymore! i think that doesn't mean there won't be a problem. i think it is time for existing political parties to come together and to find common grounds rather than making differences during this time of economic confusion. i believe in the hard works of Japanese people which is the cornerstone of the three arrows of Abenomics. i believe in Abenomics but inaction or red-tape among the Diet's members themselves can also create alot more problems than solutions. i trust the PM and his cabinet will do everything they can to move this country forward to the right economic direction no matter what.

0 ( +1 / -1 )

Congratulations Japan, I just lost my appetite!

2 ( +2 / -0 )

It should be added that 230% debt to GDP ratio is nonsense. If you net off the governments assets, it is more like 110% Those assets are the government corporations set up after the war that were privatized in the 90s. Like the train system, Japan Salt and Tabacco, lots of property, etc. etc. etc. There are dozens of these former government corporations, and the government still has 51% of the stock. Walk around the streets of Tokyo and see if anyone is panicking. We know the actual situation.

The value of these "assets" is questionable. They have lost much of ther value over the last 5 years, and have roughly the same value they had in 1980 or so. With the populaion shrinking, along with the shrinking economy, their value can only decrease further in value. An asset is only an asset as long as it has value, and someone is willing to pay for it. Were the Japanese government to attempt to liquidate these assets now, they would not get 400 trillion yen for them. They would be lucky to get 1/4 that much.

-1 ( +1 / -2 )

Right... and who will they sell all the "assets" to.... the Chinese?

0 ( +1 / -1 )

This week, the IMF called on Japan to adopt a “credible” fiscal plan to repair its books, including raising sales taxes to generate new revenue.

Yes start with you guys, america, the largest maker of Currency Paper in the world.

-1 ( +1 / -2 )

Some people will believe anything they read. Japan is never going to collapse as they have few foreign creditors. What are they going to do? Declare bankruptcy on themselves? Most of the debt (around 95%) is held by Japan's central bank.

1 ( +2 / -2 )

Is the number right? That is about$10 trilliom / USA waste money in foreign countries but Japan has $10 trilliam without wasting money in Arabic and African countries?

1 ( +2 / -1 )

1,000 trillion yen is around $10 trillion. That's nothing compared to the U.S. gov't debt of amost $17 trillion. But wait, Japan's shrinking population is only around 23 million, the ever-expanding U.S. population is over 300 million...

-1 ( +2 / -3 )

When the tipping point is reached, there'll be a bail-in. Cyprus was a dry run.

Japan is Argentina.

-3 ( +1 / -4 )

Bond is borrowing money from citizens to government. In the unusual circumstance, government can no longer pay the dividends to borrowers. Such as natural disaster and extreme corruption. Borrowers can not earn and foot the bill of government forever. If the borrower is a bank, it will declare insolvent and selling asset for repaying loans. In the most case, borrower will not get more than half amount of their money. Borrowers will feel betrayed. They did not buy the bond as charity hand out.

When government can not pay the dividend to bond holders, bond holders have no obligation of patriotic duty as keep risking their money. If there is no return, there will be capital flight. Yen will move to south as 1997 Asian financial crisis. Japanese government has to swallow the national pride and ask the help from IMF or World Bank. Although it is the last resort, it will happen sooner than later if there is no fiscal discipline.

1 ( +2 / -1 )

The comments here from the debt bugs make really entertaining reading, thanks to their utterly distorted view of reality.

Bond is borrowing money from citizens to government.

The biggest bond buyers are institutions, not citizens, including public-sector institutions.

"Japan is Argentina."

Argentina defaulted due to its huge external debt and its fixed currency. Japan has neither.

"america, the largest maker of Currency Paper in the world."

America is the world's biggest economy. It would be bizarre if it wasn't the biggest printer of money.

What are they going to do? Declare bankruptcy on themselves?

Oh, hang on. This comment reflects a writer who knows what he's talking about. How did this get on this thread?

0 ( +3 / -3 )

The biggest bond buyers are institutions, not citizens, including public-sector institutions.

Where did institutions get capital for running the business? Ask Hitachi, Sharp and Panasonic! Citizens deposit money in the banks. Institution can borrow money from banks or raise the capital from stock market. Banks will circulate money for interest for deposit holders. Bank or instittuion money is citizen money too. It there is no profits what is the points of borrowing money? Otherwise, capital fall from sky! Capitalist economy means no one can survive without capital. However Capital is not endless supply. If I borrow money to you for running business. You can not repay me interest, will I still have to borrow you more money? If I will, I will be broke sooner than later.

1 ( +2 / -1 )

But then again, 1,000 trillion yen isn't what it used to be.

2 ( +2 / -0 )

@Serrano: US debt is the result of US military spending. What Japan is spending to accumulate this much debt? Do you have detailed info? BTW, there is one article that says Japanese Govt will reduce so many Y in 2 years. Do you know how much US bonds Japan hold? Almost China hold.

-2 ( +0 / -2 )

who ever saves money in a capitalism system has no clue how this system works!!!!

-2 ( +0 / -2 )

Debt is Debt... the only reason its marginally better to be held domestically is because Toshimitsu and Keiko have been conditioned to accept 0.75% JGBs as a good rate - Hans, Peter, Abdul and Jose wouldn't accept rates this low as a viable investment

0 ( +0 / -0 )

Debt is a fiscal tool for 2 reasons: 1) Return on investment is equal or bigger than the initial borrowing and 2) an anti cyclic medium to counterbalance finance market madness (the 2nd one being the most important political action).

I see none of these two in current J-finance policy.

1 ( +1 / -0 )

In another article, Japan will reduce 8 trillins in 2 years. So, according to this articdle and another one, Japan will reduce its debts in 250 years.

2 ( +2 / -0 )

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