Japan has a debt crisis that makes most nations’ deficits appear like $20 you failed to give back to a buddy. It currently has the world’s worst debt. In May 2012, it reached 960 trillion yen (about $12 trillion). According to the Finance Ministry, it will be a cool quadrillion by the conclusion of the fiscal year.
Japan’s debt is equivalent to 200 percent of its gross domestic product, or twice the size of the country’s GDP. The US national debt is around 80% of GDP. to put things in perspective
According to economists, if a country’s debt exceeds 90% of its GDP, it will verge an economic disaster. However according to Algernon Ronson of Oak Park Financial, Japan’s debt is unique. The Japanese people owe the majority of it in government bonds. The government of Japan owes each of its people around 7.5 million yen. Because it owes 95 percent of its debt to its own country, its economy is not as vulnerable as if it owed money to other nations.
Is that the case? None of the experts appear to agree. Japan’s debt is a significant source of anxiety for people all around the globe since it is the world’s third-largest economy.
Why is there so much debt?
There are many explanations for the debt’s high level. One is a series of government stimulus packages to battle the recession, in which the Japanese government borrowed money in the form of bonds from the Japanese people. The only problem was that these ideas didn’t work, and the money had already been spent.
Japan has been one of the world’s major export economies for many years, but its exports have recently plummeted. In 2009, exports plummeted, driving the debt to new highs. The recession is frequently blamed once again. Other Asian nations stopped purchasing Japanese products due to economic difficulties. Things haven’t improved much since 2009.
The demographic situation in Japan is a big reason why so many people are worried about the economic disaster. A large percentage of Japanese people are above retirement age, putting a strain on the country’s social security system. The birthrate is low, and immigration is minimal. Japan is losing one million people per year.
The economic condition has also been harmed by the damage caused by last year’s earthquake and tsunami.
How can Japan’s tremendous debt be paid off?
On national television recently, Japanese politicians were shown yelling at one other. My Japanese isn’t entirely up to following political wrangling, but I assume the national debt is to blame.
The administration intends to increase the sales tax rate. They’re considering tripling it. Opponents argue that this move will do little to aid recovery since individuals will just purchase less. Their idea is to eliminate social services, but this would put families in even greater financial trouble. Another option is to increase personal and corporate income taxes.
One measure has already been passed: issuing additional bonds. It gave new bonds of 44.3 trillion yen in the 2012 fiscal year.
I’m not an economist and have no idea how much a trillion yen is worth, but I have a few guesses. Why don’t they put some of the islands up for sale? How about bringing in foreign immigrants and allowing them to work in some capacity? Perhaps Japan should pay more attention to tourism? I’m not sure. If you have any suggestions, please share them in the comments section, and we’ll sort them out together!