Monday, September 22, 2008

Japan - the country with the highest public debt in the world

the public debt is a whopping 195% of GDP. I don't consider Zimbabwe to be the actual top in the list, because the country is in such dire straits due to the rogue leadership under Mugabe. Japan on the other hand, has changed leadership several times, but the debt has never went down.

Surprisingly, Singapore is in the top 10, at 101%. I'm not a trained economist, so no comments on the possible implications of such high public debt for both Japan and Singapore.

this is an article reproduced from Yomiuri Shimbun - Fixing state's finances new govt's main task.

Japanese politicians being self-concerned and corrupted as they are, they have always postponed major reforms and left to their successors the task of looking at a way to limit expenses and pay back the already gigantic government's debt.

I doubt that much will be done to tackle this very serious issue, as nothing has been done for decades and Japanese politicians aren't known for their initiative in solving problems. Historically, all the major political changes that happened in Japan were caused by foreign pressure and civil wars. The last one was the US occupation of Japan after WWII. Nowdays there is nothing to push Japan to change, so it won't.

What worries me is that the Japanese State is already near bankruptcy, and if the Japan Post is privatised as the PM wishes, it will only worsen the government's solvability. It is years that observators wonder if the Japanese State will really go bankrupt. Every year, more debts accumulate, and more creditors are left with less hope of ever getting paid.

There are talks of raising consumption taxes, but that won't suffice to balance the budget. In fact, the debt is so bad that raising all taxes by 10% and cutting the government's budget to avoid any further debts, would take almost 20 years to pay back the current debt, while putting enormous strain on the economy and individual wealth.

In other words, Japan has created money artificially during the past few decades, and this money has accumulated in the form of debts, both public and corporate. If Japanese banks had to conform to the same rules of accounting as in Western countries, most of them (and all the big ones) would be bankrupt. The same is true of the Japanese government. So, the money deposited by individuals in Japanese banks (including the Japan Post Bank), is virtual money that only exist because those banks are not allowed to go bust, but in fact are completely insolvable. That means that Japanese people do not possess a fraction of the financial assets they have on paper.

The Japanese GDP per capita has been decreasing a lot since the bubble burst in 1990. Japan that once had one of the highest GDP/capita now ranks 17th in the world. If we consider the public debt and insolvanility of the banks, the real GDP per capita should be much lower than what it is already estimated now.

There was no economic miracle. The Japanese economy rose quickly because the country was in ruins in 1945, and hard work to rebuild it could only mean economic growth. After that, so much money was created artificially through real estate and financial speculation and the rise of the yen, that Japan became rich... on paper. The fact is that most people still lived in ugly, non-insulated cardboard or wooden houses (some with or corrugated iron walls or roofs) that would be called hovels in Western countries. On top of that, Japanese houses are much smaller, and salaries per hour are also considerably lower due to the very long overtime hours required by most big Japanese companies. The GDP per capita of all other prefectures than Tokyo is 1/3 to 1/2 of Tokyo's. This creates an illusion of wealth for visitors coming to Tokyo, while in fact, Japan itself is far from being a rich country, even just on paper.

This rant is not to disparage Japan itself, but the people who caused the country to put itself in this abominable situation, i.e. the Japanese government. This is probably what happens when a country want quick economic growth but tries to hamper democracy (see this thread, especially the summary in post #4).

Vain politicians tried to manipulate the international image of Japan by trying to boost the GDP by overspending and generating a collosal public debt. Then, the same government failed to properly manage urban planning in the following ways :

1) by allowing electric lines to spoil the scenery and cause serious hazard in case of earthquake.

2) by giving permits to poorly constructed building that fall apart in typhoons and eartquakes, causing many deaths to this day.

3) by allowing asbestos to be used in housing and train stations until 2005 (see thread Asbestos used in at least 20% of Japanese homes, causing lung cancers for thousands of people, and probably millions more to come.

4) by allowing industries to dispose of toxic wastes in rivers and next to rice paddies, causing numerous fatal diseases.

5) being to lenient of medical malpractices, encouraging the isolation of lepers or people with mental disorders, etc.

As long as the Japanese people will not understand the importance of politics in their daily lives, they will continue to elect people who care so little about them that they allow these dangerous things to happen. Japan may be a safe country regarding crime, but it certainly isn't regarding the general environment, be it natural disasters or human-induced disasters.

often, people like you and me will dream to go any part of Japan for a long holiday. High flyers will want to go there to work or even migrate there.

i guess we have to look harder before making any long term moves.


Mockingbird said...

i think one thing i find honorable about Japanese politicians is they admit fault readily when they have done something wrong and step down from their posts when the people are not happy with them and what they have done.

i think it's probably the only Asian country where the politicians step down readily when they are no longer popular. Not like Thailand, Malaysia, Singapore, Myanmar, etc. where the politicians will cling on to office no matter how much the people protest against them. They usually are removed by force.

The borrower is servant to the lender. Whichever country borrows and gets deep into debt is always a servant to the country from which it borrowed billions of dollars from. Forever working to pay off the interest.

Darek said...

Good article and I can almost agree with everything beside the fact that author believes in democracy as I suppose. Democracy is the most depraving and thievish system ever created. System where two drunk boomers got more valuable vote than highly respective scientist and philospher (i/e/ ancient Athens were bribed by King Philip - because in that one of a few first democracies were highly corrupted). Second thing was not mentioned is that today's currency is based on people's trust, can be produced by goverment in whatever amount they want and by banks; Nowadays currencies since their gold basis was supended and ereased cause cycles of recession that is constantly coming in every decade. And here we got thieves from goverment who involved Japan in debts, debts that will be paid by next generations, by many sacrifices what makes from all you Japanese just slaves (i.e. slaves in ancient Rome paid about 90% of his earnings to his master). Japenese people will be emphasised to pay more than 90% in hidden taxes. Japanese people will enslave themselves for sake of stupid democracy.