Daibutsu, Kamakura

Daibutsu, Kamakura
Daibutsu in Kamakura, June 2010. There were thousands of school kids visiting that day. It was still great fun.

Monday, May 04, 2009

Japan: A Debtor's Nation

The current economic crisis in America has raised the issue of American's personal debt and the drive to consume. American's have a massive amount of debt in the form of credit cards, car loans, and home mortgages. The recent economic collapse is basically the economic nature's way of correcting itself, a "deleveraging".

Japanese have long been known as relatively miserly savers. Although Japan is the second largest economy behind the United States and Japanese people love their fancy cell phones and Gucci bags, they cannot really be compared to American's when it comes to consumerism. The average Japanese citizen saves a much larger percentage of their income. American's love to buy big fancy cars merely to "show off". How else do you explain the legions of single people with a dog driving around in huge SUVs?

However, I recently thought of something regarding Japanese debt. The idea that the Japanese are great savers is really somewhat of a myth. The reason. The Japanese people have merely transferred their spending and consumerism to the Japanese Government. The Japanese Government currently has one of the largest per capita national debts of any nation on Earth, including the United States.

Japan's national debt is a mind boggling 170% of Gross Domestic Product (GDP). Only Zimbabwe has a higher percentage. The percentage of national debt to GDP for the United States is 60%, number 22 on the list. Japan's economic future and the standard of living for its citizens will be severely constrained if the national debt is not drastically reduced.

National debt information source: CIA Factbook


  1. I don't see the debt being dealt with at anytime until there is a crisis. That's usually how the government handles things here.

    The scary thing is that when there is a crisis, the J-gov will probably cash in their U.S. Bonds.

    Thank god China has more of them now.

  2. I think you are right. This type of problem usually is not noticeable to people. What will happen is there standard of living will just go down over their lifetime as the economy stagnates or grows more slowly.

  3. Nice post. I hadn't thought of it that way.

  4. not surprising Jamaica is number 4 on that debt list.

    Interesting and educational post, thanks for sharing.

  5. Yeah, I am surprised that Jamaica is up there.

  6. Italy's #6 and Italy has always been a debtor nation as far as I can remember (my grandparents are from Italy.) I don't think being in debt is detrimental as long as the country can suffer the interest payments, for a government.

    The theory in US economics is that the government can always levy a tax on the people in order to settle any debt.

    From what I understand, Japan spent a lot on infrastructure improvement in the 80's and 90's which did not translate into economic growth.

    1. Anonymous9:28 PM

      tony...mm let me guess classic "sicilian name? sicily is an island like hawaii in america that became part of italy in 1861, sicilian escaped during the ww2 because north italian declared war to south of italy and southern italian.
      italy is not a debtor country, the 2.6 trillions $ debt of itlay is owned 60 % by italians, and the rest by foreigner investor. witch country in the world doesn't have a debt? germany has 5 trillions $, france 2 trillions $,america 16 trillions $, uk 9 trillions $.
      go to check some real italian in youtube "federica fontana, paola barale, alessia marcuzzi, antonella clerici, giulia montanarini, they are real itlaian in itlay

  7. A certain amount of Government debt is ok. When it gets too large, it causes long term interests rates to rise and it causes higher inflation, thereby reducing standards of living. Some would say Americas 60% debt to GDP is too high. I am not certain of that. But I would definitely say that Japans debt to GDP is way too high. Especially with future obligations to support the growing number of retired elderly people.

  8. One thing to note is that Japan does not run a consolidated budget - so if one government department is in surplus, and it lends to another department in debt, then they do not net this out. TIf you were to consolidate intra-government lending, then in fact Japan comes a long way down the league tables in terms of debt:gdp ratio.

    There's a good paper on the situation here:

  9. Interesting. Thank you.

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