The Japan Debt Burden

With the USA  just over 100% debt to GDP, the UK too spending more than is earned in taxes, Japan looks totally unstainable.

The article by Kate Allen in the FT on the 1st October, gives some real insight to Japan.
It is amazing to know since 1975, Japan’s government has spent more than income. This is where government expenditure is higher than tax income. So for 38 years, the government has had to bridge that annual deficit by issuing bonds, known as Japanese Government Bonds (JGB’s).

Today 2013 Japan’s government revenue is about 40 Trillion Yen (£0.25 Trillion), and government expenditure is about 90 Trillion Yen (£0.56 Trillion).

¥1,000,000,000,000,000 is the Japanese National Debt (yes, 1000 Trillion Yen, my numbers are correct).
(15 zeros if you are interested… be honest, (¥1.008 quadrillion is easier to say)

That is $10.46 Trillion = £6.45 Trillion

The UK national debt is £1.2 trillion and our GDP is about £1.5 trillion
(we in the UK are about 80% Debt to GDP)

This Japanese level of debt is more than twice the size of the economy. debt versus the country’s GDP is 230%, the highest in the developed world

The debt is mainly held by domestic fixed income investors.

What is effecting the Japanese economy is the high standard of living in Japan, and that has resulted in the aging population, and the need to pay for the pensions and long term health care of an aging population, putting pressure on the government’s finances.

The most crazy figure, is that today the Japanese government has to spend over 20% of all its expenditure on debt interest.
the UK pays about 6% of government expenditure on debt interest.
Now one can understand why Japan has such low interest rates, when the level of government debt is so high, it needs low rates to be able to finance itself, and also needs access to the bond market to simply bridge the gap of its tax income and outgoings. So clearly their is confidence in the Japanese government to borrow, as domestic creditors are funding the Japanese government. As long as this confidence remains, the debt cycle continues.

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