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Response to Demeter (Original post)

Sat Jun 23, 2012, 10:28 AM

39. Japan playing with fire - unsustainable debt burden FROM NOVEMBER

 

http://soberlook.com/2011/11/japan-playing-with-fire.html

Back in 2009 we discussed the rising leverage of Japan's public sector that seemed unsustainable. Today we find the situation of Japan's debt continuing to deteriorate in the face of increasing concerns about sovereign debt globally. It is a sharp lesson for the US as the dynamics of the two nations' paths are not significantly different.

The gross debt to GDP ratio has risen to 220% in 2010 (IMF), compared to say Italy at 119% in 2010. The argument one hears is that Japan is "different". It supposedly has high savings rate and JGBs are mostly held internally. But that assumption is about to be challenged.

First of all the high savings rate in Japan is a myth. Even though the overall private savings rate is high, the bulk of that comes from the corporate sector instead of households. As corporations de-lever, they are building cash reserves, but households are actually struggling.

http://2.bp.blogspot.com/-GhS4teGk_HM/TtEwl-93glI/AAAAAAAABq8/Y7LDTRAjIE4/s320/Japan+Household+vs+Corporate+Savings.png


From the G20 report:

Stagnating household disposable income has been accompanied by a rising consumption share of disposable income and declining saving among younger households, which has reinforced dissaving done by elderly households.


Japan's extremely restrictive immigration policy has sharply impacted the nation's demographics, accelerating the aging of the population. That's another lesson for the US - restricting immigration with an aging baby boomer population is a recipe for disaster. The chart below shows projected numbers of the elderly as percentage of the overall population (source: the IMF G20 Report - below).



MUCH MORE GRAPHIC PORN AT LINK

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