IMF: Japanﾂ’s national debt to hit 250% of GDP in 2015

IMF: Japan's national debt to hit 250% of GDP in 2015

A report released today by the International Monetary Fund asserts that Japan's government debt will reach 250% of GDP in 2015. The IMF suggests that Japan increase its consumption tax by 5% as a step towards reducing its public debt.
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Dear IMF,

Thank you very much for your consideration about Japan. But I must tell you that your prediction is always wrong. I suggest IMF to re-write your paper as follows: "Japanese people's financial assets will increase to 250%of its GDP - Not Debt". I hope you will understand my sarcasm

Or as we are debt-laden, May we ask IMF to get our money back ? (Japan signs pact lending USD 100 billions to IMF) http://www.google.com/hostednews/afp/article/ALeqM5jROjJUX2J-JDW_29jU1T3M8K8nYg

Yes, IMF itself is not that reliable. Lets face it, Japan is in a pickle, but Europe and the US are far, far worse. America in particular is a real basket case.

Japan's net foreign assets rose to all-time high of 266.2 trillion yen ($2.958 trillion) in 2009.

Japan's net foreign assets hit record high - govt

Nikkei:
China has dramatically expanded its investing in Japanese government bonds this year, buying a net 541 billion yen of mostly short-term JGBs in the first four months alone.

Today's 10-yr JGB yield = 1.110. , which is the world's lowest yield, meaning the more trustable in the world. Despite the low yield, China thinks JGB is better than UST-bond and Euro-based bonds., I think.

Interesting contradiction between IMF (including economists of the West) and the reality.

I recently read an interesting book called 高校生でもわかる日本経済のすごさ, and they talked precisely about this issue in the book.

In the book the author points out that nearly none of the debt is foreign so there is in theory no threat of collapse as with Greece. Also, as Tokugawa Ieyasu-san pointed out, Net Assets are also way up. So the 'balance sheet' should be of no real worry.

The media likes to hype these things up however.

As Astroboy-san also pointed out, foreign investment is steadily rolling in, which coupled with very low interest rates provides a low-yielding but very stable financial product for the investor and to a lesser extent source of income for Japan.

I think the Japanese economy and GDP is stagnant because of the factors which many analysts point to.

For example a younger generation that is disillusioned with commercialism and afraid of their future due to the crumbling of the 終身雇用 (life employment) system.

You also have 高齢化 (aging population) where basically elderly people account for most of the population and therefore all the money sits with them. The problem is, they don't spend. They are scared of their health, the failure of the pension system, and they do things like 箪笥貯金 (stuffing money in your dresser drawers). What that means is basically they don't spend or invest, although, some people actually do keep their savings in safety deposit boxes instead of bank accounts.

So this money is not circulating in the economy precisely at a time when it needs to be.

Anyway, this is the impression I have from reading this book which was quite interesting and from reading what's in the Western Media.

All in all, as Astroboy-san initially pointed out, the IMF is simply making it tough on Japan and telling Japan to raise taxes which would be like squeezing blood from a stone.

This is probably (this is completely now my personal opinion) because they want to chide the worlds developed nations closer and closer to creating a unified economic system and currency through engineered, gradual collapse of individual national economies.

Thank you very much for your comments, but I would like to add some.

In the book the author points out that nearly none of the debt is foreign so there is in theory no threat of collapse as with Greece.

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You are telling one of two elments. The other one is All of JGB is sold in JPY. If it's need to be repaid, Bank of Japan can just print YEN.

Also, as Tokugawa Ieyasu-san pointed out, Net Assets are also way up. So the 'balance sheet' should be of no real worry.

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Trade surplus remain unchanged (not increasing), but income surplus exceeds trade surplus. Japan as a whole is earning income not only trade but also returns on investment, royalty fee, yields from financial investent.

The media likes to hype these things up however.

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Plus, international rating firms, IMF, etc. because they want to let Japanese invest foeign asset, but Japanese know investment on foreign assets in foreign currency is very risky because JPY always soared against USD, Euro, etc. Best is to keep it in Japan.

I think the Japanese economy and GDP is stagnant because of the factors which many analysts point to.

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The problem is, they don't spend. They are scared of their health, the failure of the pension system, and they do things like 窶兔ﾂ笥窶吮┐窶ｹﾃ? (stuffing money in your dresser drawers). What that means is basically they don't spend or invest, although, some people actually do keep their savings in safety deposit boxes instead of bank accounts.

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Partly right. But in my case, I am not interested in shopping because there are full of products in my house, and nothing intersting for purchasing.

So this money is not circulating in the economy precisely at a time when it needs to be.

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This is correct. In order to increase/maintain economy (GDP), somebody need to spend money. And because consumers/private companies are not interested in spending, our government is spending, resulting in huge government debts.

Government debt of USA, UK, Euro-zone are not so bad, compared to Japanese gov, but if we include debts of private sector, overall debts of USA, UK and Euro-zone are much worse than Japan. Plus those countries rely on finance from foreign countries (mostly from Japan or China). It is the reality.

All in all, as Astroboy-san initially pointed out, the IMF is simply making it tough on Japan and telling Japan to raise taxes which would be like squeezing blood from a stone.

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But people in Japan are laughing at IMF because we are lending money to IMF.

This is probably (this is completely now my personal opinion) because they want to chide the worlds developed nations closer and closer to creating a unified economic system and currency through engineered, gradual collapse of individual national economies.

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I have no idea about this, but only thing for sure is that Japan has already gone beyond the conventional economics.

Japanese companies have accumulated over 2 trillion dollars in cash...but they are not spending it...

Bloomberg - Are you a robot?

Tokugawa Ieyasu said:

Japanese companies have accumulated over 2 trillion dollars in cash...but they are not spending it...

Bloomberg - Are you a robot?

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True. Because Japan market is not expanding anymore, private companies are reluctant for investment (aka spending) as return-on-investment will not be attractive.

It cannot be helped as population growth is stopped and decreasing. Plus, soaring YEN hinders export. Domestic market is sluggish, and export market is not attractive either.

Monely is piling up only, not to go to investment/spending. As a result, those money go to the safest asset, which is JGB. Although low yields, much better than valuation loss.

Japan is really strange country, isn't it?

Dear IMF:

China's Net Buys Of JGBs Hit Record Y735.2bn In May Nikkei said --China's net buying of Japanese government bonds totaled 735.2 billion yen in May, according to data released Thursday by Japan's Ministry of Finance. The figure is 190% larger than China's JGB net purchase for all of 2005, which was itself the previous record. This shows that China is rapidly putting more of its burgeoning foreign exchange reserves into JGBs in response to Europe's fiscal crisis.....

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Realtiy is shifting towards exact opposite of IMF suggestion as the most money-conscious Chinese are purchasing JGB. Shall I offer my consultation service to IMF ?

Bond Bulls Find Shelter in Upside-Down 'Haven': William Pesek
Only in a world that's truly out of whack is Japanese debt a haven.

Ten-year bonds issued by the industrialized nation with the biggest debt yield just 1.07 percent, a seven-year low. Never mind that rapidly aging Japan is home to some of the ugliest demographic trends anywhere. Money is zooming into yen- denominated assets to avoid global turbulence.
Bloomberg - Are you a robot?

Although he predicts doom and gloom of Japanese economy, shrinking population, etc., The bond market indicates Japan is the best among worst. In short, in this planet, JGB is likely the best.

Astroboy said:

True. Because Japan market is not expanding anymore, private companies are reluctant for investment (aka spending) as return-on-investment will not be attractive.

It cannot be helped as population growth is stopped and decreasing. Plus, soaring YEN hinders export. Domestic market is sluggish, and export market is not attractive either.

Monely is piling up only, not to go to investment/spending. As a result, those money go to the safest asset, which is JGB. Although low yields, much better than valuation loss.

Japan is really strange country, isn't it?

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Maybe I'm wrong but I understood that a lot of companies were still weary of aggressive investment due to policies derived from post-bubble conservatism and a focus on re-paying debt.

I think the move to American style corporate structure has also increased conservative overtones towards investment as responsibility to shareholders takes precedence over adventurous expansion investing.

Astroboy-san, I agree that a soaring yen does hurt exports as well. but as a proportion of GDP I've read that exports do not account for as much as domestic spending. Unfortunately this is a stale-mate because domestically no one is spending anymore, so it seems that true GDP (名目GDP) is going to continue falling.

But increasing consumption tax would be the worst thing to do to an already overburdened consumer market, so as you say, the IMF is out of touch.

bakaKanadajin said:

Maybe I'm wrong but I understood that a lot of companies were still weary of aggressive investment due to policies derived from post-bubble conservatism and a focus on re-paying debt.

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Bad loans and toxic asset problems among J-companies had already been finished in around 2002-2005.

I think the move to American style corporate structure has also increased conservative overtones towards investment as responsibility to shareholders takes precedence over adventurous expansion investing.

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I agree. J-companies have adopted international accounting system (or mark-to-market accounting system) since 2000.

Astroboy-san, I agree that a soaring yen does hurt exports as well. but as a proportion of GDP I've read that exports do not account for as much as domestic spending.

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Your understanding is correct. Japan is the second least export-reliant cuntry after USA in the world in terms of % per GDP. But of course, amount is huge.

Unfortunately this is a stale-mate because domestically no one is spending anymore, so it seems that true GDP (窶督ｼ窶禿哦DP) is going to continue falling.

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I don't think it will fall but remain unchanged for next 10 years or so, but it will fall in longer term as population will shrink. But this means per-capita GDP will increase.

But increasing consumption tax would be the worst thing to do to an already overburdened consumer market, so as you say, the IMF is out of touch.

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You are right. Raising Tax in the midst of recession/weak economy is suicide. and thus I don't like DPJ.

Astroboy said:

Japan is the second least export-reliant cuntry after USA in the world in terms of % per GDP. But of course, amount is huge.

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That's because Japanese multinationals played the labor arbitrage game-outsourcing most of its productions of lower-end models to developing nations in Asia.

Tokugawa Ieyasu said:

That's because Japanese multinationals played the labor arbitrage game-outsourcing most of its productions of lower-end models to developing nations in Asia.

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In other words, Japanese YEN soared against USD or others - more than triple - from mid-1980s. Soared JPY forced J-companies to go out of Japan, and let them import more, and increased liquidity of money in Japan, and resulted in bubble during late 1980s - early 1990s. Deflationery economy is also one of results of soared JPY, I think.

Japan 10-Year Yield Falls Below 1 Percent for First Time Since August 2003
Bloomberg - Are you a robot?

Less than 1% !!! This means that money has continued to move forward the safest asset - Japan's Government Bond - while J-government debts is predicted by IMF to reach 250% of GDP in 2015. It is obvious that there is ultra-sufficient money in Japan. People are not interested in spending.

The article also said "Yields are going down not only in Japan, but also globally." This means that the world economy is following Japan's path and entering into depression as EU/USA do not learn the Japanese lesson.

Astroboy said:

Japan 10-Year Yield Falls Below 1 Percent for First Time Since August 2003
Bloomberg - Are you a robot?
Less than 1% !!! This means that money has continued to move forward the safest asset - Japan's Government Bond - while J-government debts is predicted by IMF to reach 250% of GDP in 2015. It is obvious that there is ultra-sufficient money in Japan. People are not interested in spending.
The article also said ﾂ"Yields are going down not only in Japan, but also globally.ﾂ" This means that the world economy is following Japan's path and entering into depression as EU/USA do not learn the Japanese lesson.

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That's right! That is what I have been saying all along. There is a lot more REAL wealth in Japan than in America. Here the whole economy is smoke and mirrors and why, on this forum, few if any want to believe this, is beyond me.
Some say that I am "down" on the US. But I live here and see what is going on. It is very sad.
Japan was in a much stronger position when it entered deflation. We are still a creditor nation. A lot of the spending was unnecessary just to bolster jobs when people should have been retrained instead. We also are restructuring our whole immigration system and are SLOWLY moving toward better working conditions so more people will want to have children.
All too slow for my tastes, but it is better than what I see in America.

Yen has edge over gold in battle for supremacy
http://bx.businessweek.com/stock-ma...moreover.com/click/here.pl?r3033771586&f=9791

There are not many financial assets that are priced higher today than before the Lehman shock in September 2008. Two that have done investors proud are the yen and gold bullion.
At first there seems little in common between the yellow metal, which has been a store of value through the ages, and the currency of a country with feeble economic growth and Godzilla-sized government debt. Yet both are perceived as havens of safety in a troubled world. Strangely, the yen may be the more deserving of that accolade

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Thanking to Supremacy of JPY, Japan's CPI continues to be deflationary, and export becomes sluggish. Probably travelling abroad will be good....

But IMF must explain why the currency of a country with feeble economic growth and Godzilla-sized government debt is SUPREMACY. Otherwise, IMF proves itself a liar.