Wednesday, May 12, 2010

Don't worry, be happy

Japan's debt is apx 200% of GDP---the world's largest---but it isn't as bad as it seems 'cause most of the debt is owed to domestic suckers holders of government bonds.

"...Given Japan’s demographics, the current-account surplus may decrease and some even say it will go into deficit” in the long term, Masaaki Kaizuka, director of debt management at the ministry, said in Tokyo today. “We may see the need to increase reliance from abroad, whether we want to or not.” Bloomberg Businessweek

According to the article, Japan's debt may rise to 246% of GDP in 2012. Will Japan still have a AA- credit rating? Will foreign investors care? Will they rush in for the same 1.4% yield on a 10-year bond?

We should refrain from panic because according to Naoki Izuka of Mizuho, the government simply* needs a "feasible, credible and sustainable fiscal plan" and to resolve the problem within 5-years and "we'll be fine."

Nothing to it. A simple thing for any government, but especially the government here, whether led by the DPJ, the LDP, the Commies, or whatever. And we know how welcome foreign investors have been in the past.

*My word, not his.


  1. There's a former British Chancellor of the Exchequer who is at a loose end these days who might be able to help out. He knows a thing or two about running up an unsustainable debt too.

  2. He'll be working again soon, I'm sure as there is still plenty of demand. He might try the US as long as he can talk out both sides of his mouth.