Japan NOT the worst debtor nation ...

[Samurai_Jerk]

... but still fucked.

The Debt Bomb Facing the World

If policymakers focused their attention in 2009 on dragging the global economy out of recession, this year looks likely to center on reining in the massive piles of government debt built up by big bailout packages. Failing to wrestle down the fiscal debt monster could stall the nascent worldwide economic recovery.

Already this year, international rating agencies have warned about unsustainable budget deficits in Greece and Ireland, and most members of the euro zone have sailed past the 3% budget deficit cap required for membership in the common European currency. Government debt ratios in the U.S. and Britain could take decades to return to normal levels. ...

Japan's Stats



Sovereign Credit Rating: AA
Debt-to-GDP Ratio, 2010: 227.0%
Current Account Balance, 2010: 2.0%
GDP Growth, 2010: 1.6%
Budget Deficit Ratio, 2010: –10.2%

Despite one of the world's highest debt-to-GDP ratios, the world's second-largest economy is still viewed as a relatively safe bet by global investors. That's due to a strong export industry, with the likes of global auto giant Toyota and tech behemoths Sony and Panasonic ranking among the world's largest companies. Yet problems lie ahead. Late in 2009, the government approved an $81 billion stimulus package, though much of Japan's domestic economy, particularly its sluggish financial-services sector, still hasn't recovered from the real estate bust and Asian financial crisis in the late 1990s.

[gkanai]

Here's a question for anyone who wants to take a crack at it.

If the vast majority of Japan Government Bonds (JGB)s are held by Japanese nationals (some 90+% iirc) and Japanese investors have no interest or care about a drop in S&P/Moodys/Fitch ratings for JGBs, what is the impact on the market if the credit rating of JGBs does drop?

The US is in a different (worse) situation because US debt is owned by foreign banks or foreign governments, right?

[Number11]

Half of the US debt is owned by the US government, meaning that it printed some paper and gave the paper to itself and printed money to give to itself to buy the paper it printed. Or something like that. See how that works? Great trick, if you're a country.

Here's a breakdown of US debt:

Federal Reserve + intra-governmental holdings $4.785 trillion
Mutual funds $769.1 billion
China (additional $99.8 billion from Hong Kong) $776.4 billion
Japan $711.8 billion
Other investors $629.7 billion
State and local governments $516.9–$550.3 billion
Pension funds $456.4 billion
United Kingdom $214 billion
Oil exporters $191 billion
Caribbean banking centers $189.7 billion
Brazil $126–$158 billion
Insurance companies $126.4 billion
Russia $119.9 billion
Depository Institutions $107.3 billion
Luxembourg $104.2 billionFederal Reserve + intra-governmental holdings $4.785 trillion
Mutual funds $769.1 billion
China (additional $99.8 billion from Hong Kong) $776.4 billion
Japan $711.8 billion
Other investors $629.7 billion
State and local governments $516.9–$550.3 billion
Pension funds $456.4 billion
United Kingdom $214 billion
Oil exporters $191 billion
Caribbean banking centers $189.7 billion
Brazil $126–$158 billion
Insurance companies $126.4 billion
Russia $119.9 billion
Depository Institutions $107.3 billion
Luxembourg $104.2 billion

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The sleazy bankers and con men who earn their living by selling advice and investments will be outraged at what I'm about to write, but I don't care. The real answer to the ratings question is probably "It doesn't matter," but you'll never catch them saying that.

The ratings companies are just as crooked and meaningless, but pretend that they're legitimate. They wear suits to fool everyone into thinking that they're important. The real function of ratings companies is to sell their ratings and (snicker) research (cough).

When it comes to debt, there will always be an economist or wannabe economist who will take the opposite view of every other economist or wannabe economist. People have been writing doom about the Japanese economy and debt for a decade. It didn't implode or explode.

Where is the hyperinflation always predicted? It didn't happen.

The debt is at unknown levels and no one, I repeat, no one, has any clue about what the impact will or has been. If they say that they know, they are lying.

I'm sure more red snot will be coming my way.

[FG Lurker]

Is It Too Soon to Worry About Japanese Debt?
WSJ Online, January 20, 2010

Investors would be wise to cast a nervous eye on Japanese debt.

Yields on Japanese government bonds have crept higher of late, but are still exceptionally low in nominal terms. As they have been for a long, long time. Indeed, for the past 20 years speculators have routinely bet against the Japanese bond market and for 20 years JGBs have sent short sellers crawling back to their caves, bewailing their losses.

So what's different now?

[...]

In 1991, the Japanese government's net debt stood at a shade over 13% of GDP. Bear in mind, that's the stock of debt, not the annual deficit. By last year, the annual deficit was running at over 10% of GDP, leaving the net deficit at 104% of GDP, according to the IMF. By 2014, net debt is seen hitting 143% of GDP, with annual deficits running at over 7% of GDP every year since 2008.

To finance this gap, bond issuance is running at some 90% of tax revenue.

If those sort of numbers look unsustainable, they are. Indeed, any other country in the same situation would have seen its bond market melt down by now. But not Japan. That's because the massive rise in government debt notwithstanding, the bonds have always found buyers. The Japanese government has managed to run these huge deficits because it has merely been compensating for a shortfall in private-sector demand. High levels of household and corporate savings offset the government's deficits.

But that's changing. Japanese household savings rates have dropped from over 14% in 1992 to little more than 2% by 2008. And as the population ages, that savings rate is likely to keep falling. Overall, Japanese households' stock of wealth is declining.

So who's going to replace Japanese households as the end buyer of Japanese government debt? Does anyone anywhere else in the world really think 10-year JGBs yielding less than 1.4% are a good thing?

(Full Story)

The debt is at unknown levels and no one, I repeat, no one, has any clue about what the impact will or has been. If they say that they know, they are lying.

I don't think the question is what the impact will be, I think the question is how long can the current situation be sustained. So far the charade has held up but it can't and won't forever.

As domestic savings decrease so will domestic demand for government bonds. This has already happened actually -- bond sales still have more demand than available bonds but the gap between buying demand and selling availability has narrowed considerably. Once demand gets bellow supply (which *will* happen), what is the j-gov't going to do? I am probably missing something but I see 4 possible ways they can proceed:

1) Print trillions of yen per year to buy their own bonds.

2) Find international buyers. They have actually tried this but without a whole lot of success for very obvious reasons.

3) Massive tax increases.

4) Massive benefit cuts.

It is likely to be a combination of 1, 3, 4 in my opinion. Abolishing the pension system would be a good place to start.

[Buraku]

Debt ceiling: 2011 showdown leaves lessons for Biden, Republicans
https://www.timesfreepress.com/news/202 ... publicans/
The debate around raising the debt ceiling sounds eerily similar: Newly elected House Republicans, eager to confront the Democratic president in the White House

Russia ‘borrows $13.6bn in largest ever debt issuance in a single day’ to continue faltering war
https://www.standard.co.uk/news/world/r ... 41151.html

The EU is leading Ukraine into a sovereign debt crisis
https://www.politico.eu/article/europea ... 8-billion/

China's EXIM bank offers Sri Lanka debt extension
https://www.straitstimes.com/asia/south ... -extension