- 17 Sep 2005
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That's a good point, because as I understand it, most of J-bonds are held by domestic entities, whereas US T-bonds are mostly held by foreign entities. I think that is not insignificant.
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Of course, Japan has its problems. Its average age is rising steadily and its population is shrinking. One in five Japanese is over 65. The Democrats have promised to raise pensions and payments to parents – and to cut taxes. It is hard to see how the sums add up. While the US and the UK worry that their public-sector debts could hit 80 per cent of gross domestic product, Japan's debt is heading for 200 per cent.
Some of its efforts to deal with an ageing society are positively unnerving. The country has led the world in developing robots as companions for the elderly. These include a "snuggling Ifbot" that, according to press reports, "lives in an astronaut suit, chats about the weather, sings and plays games".
It is best not to laugh. As the US and Europe struggle to come to terms with the aftermath of a bubble economy, rising public debt and the retirement of the baby-boom generation, they should look to Japan with respect. It may be the future.
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Yields on benchmark government's 10-years bonds .... in selected countries
Japan: Nearly 1% only ..... meaning enough J-bond purchaser in Japan. But other countries' yields are gradually up.... meaning insufficent purchaser in those countries. Of course, in other words, there are not so many risk-assets in Japan for investors to spend.... But for ordinary people, Lower yield of J-bonds means Lower house loan rate.
While the interest rate on the national debt may be low, 1% x 1.7 GDP per annum is a huge amount of money that must be covered by the national budget. (Japan doesn't wiley niley print money to pay it off.) If inflation kicks in and the interest rate rises, we're in for a very bad time. So I don't think the debt should be taken lightly.
I advise you NOT to use "national debt", but correct is "Government Debt" as owner of J-bonds are almost all Japanese. As I said, government debt is equal to Japanese citizen's "Asset".
Inflation ? .... Japan is a country of Deflation for the past 10 years or more, and still being deflation. Infaltion is already dead in Japan a long time ago.
Alright, government debt. However, my point is that servicing this government debt even at 1% a year is a tremendous burden on taxpayers. It's over 7 trillion yen per year (for now) that must be paid out of the budget. Do you know what I could do with 7 trillion yen a year? Besides having a good time in Roppongi, something a lot more productive than what it's being used for now. So this debt is a big drag on the economy and needs to be scaled back. Besides, you can't depend on deflation lasting forever.
I'm gonna have to talk to Mr. Hatoyama about this. We'll blame the LDP
Then, the government is monopolizing a huge portion of household savings for unproductive purpose indefinitely. Isn't that a waste? Shouldn't some or more of that asset be used by the private sector for economic growth?
As for printing money to pay the interest on the debt, why stop at just the interest portion? Why not monetize some of that debt, especially now when the yen is getting stronger and deflation is the immediate problem. How about monetizing about 2 or 3% of the debt per year until inflation becomes a problem. If done this way, the government won't have to talk about doubling the consumption tax. (Why didn't the LDP think of this?)
Don't you think the government may have problems trying to roll-over the debt in the not so distant future.
I'd rather buy Australian bonds than J-bonds right now.
I am not sure how you define "utopia" as it is hard to imagine the Japanese domestic economy is faring any better than other industrialized countries. Maybe the Japanese corporate and industrial complexes (one of the three pillars of Japan's power structures, the others being politicians and career bureaucrats) are making money from overseas investments while the middle class Japanese nationals have started experiencing the lower standard of living.Japan is approaching Utopia. I think. But J-government tries to hide such a secret because if it is known by US economists, US government will tell us "Hey Japan, Give us money!"
That's true Japan took close to 2 decades to clean up the bad loans. In the current recession, many large (and small, for that matter) financial entities still carry hard-to-assess complex financial instruments and derivatives. Those financial chop shops have cooked up so many questionable asset classes that no one can really tell definitively how much bad assets / loans they have on their books.IMF suggests earlier recovery; U.S. stocks rise
TOPWRAP 3-IMF suggests earlier recovery; U.S. stocks rise
The most importrant Japanese Lesson:
After bubble burst, stock market may often show "Up or Recovery", and people think "we are seeing the end of tunnel", but Crisis will not end as far as financial companies' BAD Loan problems are NOT solved, and Solving BAD Loan problemes take More Years as those financial companies usually continue to hide bad loans. And We call it "Balance Sheet Recession"
I am not sure if the Japanese collectively sing "this is our (my) debt" and hand out their hard earned money to the govt without experiencing personal financial hardship.
Your analogy does not illustrate this matter at all (or, to put it bluntly, there is no relevance here at all). Japan's populace (or any other nationals who have individual freedom) does not consider their neighbors as their own relatives and will not lend money freely to total strangers. From your comment, you sound like you will gladly pay whatever higher taxes the government levy, without any protest.PLease imagine:
Somebody are living next to my house.
Astroboy is lending money to his wife, and his wife borrows 200% of annual house income from Astroboy (husband). But neighbors are telling "Astroboy's family is going bankrupt"..... Is this legitimate ?
IF Astroboy's wife is borrowing money from Banks or neighbors, then it's Astroboy family's DEBT, and which must be repaid, but we are lending and borrowing money within our house ! Plus such lending money is being printed by inhouse Canon Laser Printer on Astroboy's desk ....
I would like to ask you "What is your problem with our inhouse borrwing & lending ?"
Well, a country does not collapse overnight or in a matter of a few years. Usually, it takes a slow gradual decline over the course of decades before it reaches a point of no return. At that point, a new normal will be set (I am not sure what kind of normal it would be). I don't think there is something good Japan did; rather, it dithered along postponing the decisions (like any other democratic countries do).The mass media has been predicting the downfall of Japan for years. However, despite the bad years following the collapse of the bubble era, Japanese society has remained remarkably stable and the economy has stubbornly remained in the no. 2 position in the world. So Japan must be doing something rigtht that people who only read newspapers can't understand. Newspaper journalist have to write about something and picking on Japan seems to be a sure way to generate interest, if not real thought. So paraphrasing newspaper/magazine aritcles is not a very smart thing to do.
The difference between a country's external financial assets and liabilities is the net international investment position. A country's international investment position (IIP) is a financial statement setting out the value and composition of that country's external financial assets and liabilities. International Investment Position = domestically owned foreign assets - foreign owned domestic assets.
Net international investment position - Wikipedia