Title: When Will Japan's Debt Crisis Implode?
Headings: When Will Japan's Debt Crisis Implode?
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When Will Japan's Debt Crisis Implode?
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Money traders in Japan watch the monitors at a money market brokerage company in Tokyo. ( AP ... [+]
Photo/Shizuo Kambayashi)
Japan is one of the most developed and most influential countries in the world. However, it is also the most indebted country in the world, carrying a substantial debt roughly 233% of GDP on its shoulders. The ‘runner-up’ is Greece with 177%, which is still relatively small in comparison. One may expect that Japan, with its eye-watering debt levels, would be an investment "leper," where foreign direct investment (FDI) would actively avoid this frail and debt-ridden economy. We witnessed that since 1997, debt levels grew consistently, GDP growth stagnated and the returns of the 10-year government bonds were negative. Despite of these worrying indicators, Japan continues to be a stable and creditworthy nation that attracts investors. How Can Japan Tolerate Its Enormous Debt Level? First off, let’s have a look at how Japan got trapped in debt, especially after WW2 when the economy rose to power and prominence. Deflation has been Japan’s economic setback since the early 1990s.