Japan

Today, I read a couple of interesting articles about Japan.  Not all the numbers (from the two articles) are perfectly consistent, but it really makes you think about Japan’s problems.  I’ve included some of the numbers below.  One article was written by Gary Shilling and the other was written by a Japanese politician.

The strange thing about this whole story is that Japan is seen as a safe haven (much like the U.S.).  While Japan is very different than us (most notably, they’re huge savers; in addition, they’ve been in and out of recession for the past 20+ years), Japan may just be a few years ahead of us in other ways (their aging population and their debt crisis).  So, here are some numbers from the articles (and again, they’re not all perfectly consistent)…

Japan – Another Disaster

The outstanding amount of Japanese government bonds (JGBs) is almost $9 trillion.  As a point of comparison, the 17-country Eurozone has $10.5 trillion of total debt (and triple the population).

Japan’s debt was reported to be 220% of GDP in 2011 (according to the IMF).  According to Gary Shilling, there is a lot of government lending between entities and Japan’s debt on a net basis is 113%.

Debt service and social-security payment consume 53.5% of total outlays for 2012.

Debt service now accounts for 43% of government revenue.

The gap between public spending and revenue was 9.3% of GDP for 2010.

Annual tax revenue has fallen 30% since 1989.  Overall tax revenue is 27% of GDP, putting Japan in 28^th place among the 35 OECD countries.

The share of those aged 65 or over has nearly doubled over the past two decades to 23%.  It is 13% in the U.S. and 16% for Europe.  This means that you will have more people drawing social security and and relying on government-provided healthcare.  In addition, you would expect that the ability of the Japanese to save (buy Japanese bonds) will decrease.

Japan has been in the news recently because they’ve increased their consumption tax.  It’s currently 5%.  It will be 8% in 2014 and 10% in 2015.  Unfortunately, that will do little to solve their problems.

A Few Positives

On the positive side, Japan is the world’s biggest creditor nation with net foreign assets of $3.19 trillion.

Japan has a per capita GDP of $45,920.

The key reason why you don’t hear much about Japan is that 93% of its debt is domestically held.  The Bank of Japan is now buying almost one-third of the JGBs issued each year.

In some ways, Japan makes our fiscal situation look healthy…

Have a great week.

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