Is Japan the new Greece? -

Is Japan the new Greece?

Japanese PM says debt-ridden country must rein in spending


Japanese Prime Minister Naoto Kan says his country could become the next Greece if it doesn’t reduce its current debt load. Unlike Greece, Japan’s debt is held mostly domestically, which should assure it a greater degree of stability than the nearly-bankrupt Mediterranean nation, but Kan says Japan needs to rein in spending before things spiral further out of control. “It is difficult to sustain a policy that relies too heavily on issuing debt,” he said. “As we have seen with the financial confusion in the European community stemming from Greece, our finances could collapse if trust in national bonds is lost and growing national debt is left alone.” Kan is expected to impose austerity measures in Japan, whose debt, worth 218.6 per cent of its gross domestic product in 2009, is the highest among the world’s industrialized nations.

CBC News

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Is Japan the new Greece?

  1. Does anyone else remember when everyone and their dog were afraid of them and the powerhouse they were – except they took the nanny state philosophy to it's logical conclusion and now the consequences have kicked in as they did not have the resources to carry them when times got bad and now look at them – I feel sorry for them!

    • Isn't that a bit simplistic. If the country has social programs, does not make it out of control debted. Isn't it interesting that Scandinavian countries (probably your example of top nanny states: publicly funded health, education, safety net) have much lower debt ratios than the US.

  2. Japan has had debt well above that of Greece's current debt levels for quite some time now, with little issue. Their bond rates are quite low as well, below that of Canada and the US, if I'm not mistaken. They have a massive debt problem, have for quite some time, but they're no Greece and are not looking at any sort of debt crisis.

  3. Japan is in worse shape than Greece. The issue isn't debt; it's population demographics.
    Their population's average age is already in the low 40's. That's past the point of no return.

    Japan will be gone in 50 years. This is not a prediction, it's a certainty.

    • A valid argument. Most of the country's that are facing debt crisis can be tied to an ageing population that's numbers are in decline. Systems were set up that were too reliant on population growth to control rising costs. Canada may yet fall into this trench.

    • That really depends on very loose definitions of gone.

    • Solution: immigration.

      • Immigration won't work for very long (look at Western Europe as an example), and in Japan's case it won't work at all, since Gaijin don't fit in very well.

      • Immigration only works if the new arrivals are fitting into positions that help drive the economy as well as pay "taxes" to the Canadian government. Too many fall into service or value added services that don't really create new wealth. Doctors, scientists and engineers would be an attractive boost but only if they stay here and spend their earnings here.
        It would be a more valid solution to rethink the financing and administrative organization of deemed vital social programs.
        It's not all that different than what took place in the auto sector. Expansion collapsed into contraction and benefits/ pensions couldn't be funded by a smaller work force. Nor would the auto industry survive continually trying to expand.

  4. Japan's biggest problem in coming years will be their low birthrate. They are simply not replacing their population. Other European countries, most specifically Germany, Sweden, Norway and Italy are facing the same issue. Our economic model is based on population growth; Canada will face the same issue (to a lesser extent) when the bulge of baby boomers retire and are supported by far fewer workers behind them. This will result in the tax revenue gained from employment dropping, making Canada's current debt load unmanageable.

    Demographics are working against all of us but no government seems willing to do what it takes to fix the ticking debt time bomb.

  5. There is a significant difference between Japan and Greece. Greece is part of the Eurozone and has no control over the value of its currency. Japan, in contrast, can devalue competitively in order to blunt the negative short term impact of any austerity programs. Indeed, this is the component of the Canadian economy of the 1990s that most people miss. Chretien was able to balance the budget without a serious recession by driving the loonie to about 63 cents US (Chretien didn't devalue the loonie directly, of course, this happened as the Bank of Canada sterilized the effects of the budget cuts). Canadian growth in the 90s was export-led for a reason – our exports were [artificially] cheap.

    The problem Japan may face (and which we did not face), however, is that many countries have debt problems. Competitive devaluation only works if you are the only one doing it. If your trading partners devalue their currencies as well, you have chaos.

    The other problem Japan has is not its birth-rate (you can make up for a slower birth-rate with faster productivity growth), it is technological. Japan is not the technological powerhouse it is believed to be. Japanese growth was driven largely by advances in automobiles and consumer electronics. The early 90s myth of coming Japanese dominance was rooted largely in the fact that these are highly visible sectors of the economy. However, they are actually rather passe, and do not yield particularly large returns. Increasingly, countries like India and China are entering these sectors driving returns down even more. The Japanese are not major players in software, biotech, aerospace, or really any high tech sector save robotics. That is not likely to change any time soon, because the Japanese are process innovators, not product innovators.

  6. I have lived in Japan off and on for the past few years. Japan has problems (demographics, debt, etc.) that have not been addressed by successive governments. I am delighted to see Naoto Kan take charge and finally acknowledge the need to deal with these issues. All four of his predecessors were the sons or grandsons of previous prime ministers. Finally, with new blood, we are seeing someone who isn't living off the past.