"Some foresee Japan--one of the world’s biggest exporters--going bankrupt and its currency plummet if the situation doesn’t change near term.Now a significant amount of the country's debt is held by it's own citizens, but that is still a claim on the country's future GDP, which will have to be produced by a significantly smaller population.
For years, the Japanese have relied on exports to support their economy... but exports have dried up given the severe recession in the global economy, especially in the US. In the last six months, Japan has lost almost a quarter of a trillion dollars in export revenue.
In January, Japan's exports plunged nearly 47% leading to a trade deficit of $9 billion. This is Japan's first trade deficit in 13 years and its biggest deficit in 25 years.
“When you consider the debt, the bad economy, and the coming population problem, it's clear the Japanese government will go bankrupt and may not pay off the money it owes,” said Jonathan Paul, principal economist at Krug and Bordman Advisory.
“There is a much smaller workforce (in Japan) which actually pays taxes. The economy has shrunk and hence businesses are also paying less tax. Second, the elderly consume social security, health care, and pension resources. These are costs to the government. As the senior population rises, these liabilities increase. The elderly don't pay income taxes,” Paul added.
Japan has the second-lowest birth rate in the industrialized world. In Japan, the birth rate has fallen below 1.2. Japan's population fell for the first year in 2005. By 2050, if this trend continues, Japan's population will fall by 20%.
The other problem is life expectancy is going up in Japan. So the elderly are becoming the largest segment of Japan's population. Right now, 20% of Japan's population is over 65 years. By 2050, 40% of Japan's population will be over 65 years old. In the US, the “65 and up” population makes up about 12% of society.
Since falling into a recession 20 years ago following the Asian economic crisis, the Japanese government has infused trillions of dollars into its banking system. In the last six months, it approved three stimulus plans totalling $100 billion. This week, the Japanese prime minister proposed the largest bailout plan yet of $200 billion. As a result, Japan now owes its creditors $7.8 trillion.
Going by the government debt to GDP, a measure for indebtedness of a county, Japan leads with a ratio of 187 per cent. The US follows with debt-to-GDP ratio of 75 per cent, and UK at 48 per cent. "
Japan Real Time Charts and Data
Edward Hugh is only able to update this blog from time to time, but he does run a lively Twitter account with plenty of Japan related comment. He also maintains a collection of constantly updated Japan data charts with short updates on a Storify dedicated page Is Japan Once More Back in Deflation?
Monday, March 23, 2009
Summary of Japan's economic situation
A commenter provided a link to
Japan in trouble; India relatively safe, a piece in The Economic Times which states: