Global Economic Crisis » Japanese Economic and Debt Crisis: Is Japan the Next Greece?
Japanese Economic and Debt Crisis: Is Japan the Next Greece?
With a public debt to GDP ratio of about 200%, Japan is the most indebted major economy in the world.
If this were the public debt ratio of the United States or the UK, both nations would be experiencing a catastrophic sovereign debt crisis.
If this was the public debt correlation in Greece, Athens would already be insolvent and for sale.
But until now, Tokyo had the luxury of incurring increasingly heavy debt loads, owing to a nation of patriotic savers willing to loan the government money at absurdly low interest rates. But no longer.
Just what is propping up the Yen?
Why isn't it in freefall?
By certain measures, Japan's debt load is worse than that of Greece.
Japan's outstanding long-term government debt is set to reach 862 trillion yen at the end of March 2011, or 181 percent of the country's gross domestic product, the Ministry of Finance says.
If short-term debt is added, Japan's liabilities will hit 197 percent of GDP this year and 204 percent in 2011, the highest among advanced economies and far worse than Greece's debt-to-GDP ratio of around 130 percent, OECD figures show.
If that is combined with a significant loss of faith among Japanese in domestic investments, the government would lose its most important source of funding debt.
Is it just surviving on faith and hope?
As noted by Kan, the consequences of a collapse in Japan's finances would be different. Under such a scenario, there might not be any country or agency like the IMF able to rescue Japan, he said.