Title: Japan's economy - About that debt | Free exchange | The Economist
Headings: About that debt
Japan's economy
About that debt
Content: As Paul Krugman has said, a loss of market confidence in Japan's fiscal situation would not necessarily be a bad thing; if capital outflows led to a lower yen and higher inflation, that would be a welcome outcome for the Bank of Japan. And a serious debt panic need not be a concern so long as markets have faith that Japan could address its fiscal issues when push comes to shove. Given the readiness with which Japan moved forward on the initial tax rise, despite rock-bottom interest rates, it stands to reason that any meaningful uptick in government borrowing costs would prompt further fiscal consolidation. So for now fiscal concerns ought clearly to be second fiddle to growth-boosting policies. And still another answer is that while Japan was once a very dirty shirt indeed, it is looking less dirty by the day. Among big bond issuers euro-area economies are moving up the league tables. Those euro-area economies do not have their own central bank, and the central bank they do have is not nearly as eager as the Bank of Japan is to buy government bonds. If liquid rich-world bonds are a scarce and precious resource, then the troubles within the euro zone are good news for Japan. And another sign that it ought to worry a bit less about its fiscal shortfalls.