The next panic?

Reading economic reports on Japan is disheartening. The latest salvo of news certainly does not look bright at all. Eco-scare?

First, the Atlantic Monthly:

The Next Panic
Europe's crisis will be followed by a more devastating one, likely beginning in Japan

A crisis in Japan would most likely manifest as a collapse of confidence in the yen: At some point, Japanese citizens will decide that saving in any yen-denominated asset is not worth the risk. Then interest rates will rise; the capital position of banks, insurance companies, and pension funds will worsen (because they all hold long-maturing bonds, which fall in value when rates rise); and fears of insolvency will surface.

Japan has some buffers against calamity - particularly, its assets held outside the country (including more than $1 trillion in foreign-exchange reserves) and its unmatched ability to export. Nevertheless, the real value of the roughly $14 trillion in government bonds will fall significantly once people fully realize that the tax base is aging and shrinking. Presumably, the yen will also depreciate, perhaps sharply.

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Then, the Washington Post, on the economic decline and a generation without ambition:

A declining Japan loses its once-hopeful champions

But today, former Japan optimists see a disturbing trend. Fewer Japanese, they say, want to interact with the rest of the world, and undergraduate enrollment of Japanese students at U.S. universities has fallen more than 50 percent since 2000. The generation now entering Japan's job market is described by older workers here as risk-averse and unambitious, with security and comfort their top priorities.

"They have just given up trying to be number one" said Yoichi Funabashi, former editor in chief of the Asahi Shimbun newspaper and chairman of the Rebuild Japan Initiative. "People think you just cannot beat China, so don't even try. But that's bad, because if you don't train yourself on the international scene, you don't . . . sharpen your edge. And you become more inward-looking. There's a sense in Japan that we are unprepared to be a tough, competitive player in this global world."

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And lastly, the WP again, on what Japan's decline means for the rest of the world:

The scary global implications of Japan's slowdown

One indicator that could cause concern is public debt as a proportion of GDP ― a way of measuring how much the government owes versus how much the country's economy is worth. The higher this number, the greater the damage if the country's economy crashes and interest on that debt shoots up. The IMF says that Japan's is the highest in the world, with public debt worth 229 percent of national GDP. For comparison, Greece is ranked second ― with 163 percent. The United States carries 103 percent.

Unlike those European economies, however, Japan has been able to manage its debt because interest rates have been below 1 percent. But the danger is that investors in and outside of Japan, who have poured money into Japanese debt, will one day look at the country's aging and shrinking tax base, and decide that debt might not actually be worth as much as they'd thought.

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Do you still have confidence in Japan's ability to ever recover? Or should we get used to tightening our belts in a greying society? What are your thoughts on this?

I beleive that Japan best days is not come yet. It will recover.
About 'greying society', it is greying everywhere, and seems that is normal for any society.
Even China start giving back with birth ratio.

BTW, You should read some russian economic reports, these are something. All world around is sinking and russia is the only d'Artagnan People, who are doing reports, they are paid for that. I am working somehow around scientist, and I know exactly what real scientist could write for a salary

I think it will get to the point where Japan will have no choice but to diversify the way they compete globally. I've always viewed Japan as a fierce global competitor but I suppose my bias blinded me to how uncompetitive they have become. Which is hard to say because the yen is doing so well right now but currencies can be very misleading, aka US Dollars and Euro.

Every one in the world is on crunch time with their finances with the views that our societies are "greying" and all of the rampant corruption. Even though this has been happening for many years, the focus is being drawn on these particular areas so I think it seems much worse than it is. But what do I know, I can still pay my bills where there are people in Spain, Portugal and Greece who are scavenging in street for food...

So basically, yes, I have confidence Japan will be able to recover Of course as a fail safe, be more careful with how you spend your money :/