Kan's Megaproblem

By Scalise, Paul J. | Newsweek International, June 21, 2010 | Go to article overview

Kan's Megaproblem


Scalise, Paul J., Newsweek International


Byline: Paul J. Scalise

Japan's debt is too big to manage.

Japan's former finance minister, Naoto Kan, has become the nation's fifth prime minister in just four years--and the predictable cycle of high expectations followed by mild cynicism has begun anew. How long he will remain in office is anyone's guess, but one thing is certain: trying to solve government finances could be for this premier the same kind of career killer that the Futenma base-relocation issue was for the last one.

The inescapable math of an aging society that has been promised huge retirement and welfare benefits, which are not fully covered by taxes, could make Kan's tenure a true test of government and party leadership. Japan's gross debt-to-GDP ratio is second only to Zimbabwe, at almost 200 percent. Even if double counting the debt (what government agencies owe each other) were deducted, net debt is still 113 percent of GDP. That's about the same ratio as Greece, which ignited a continentwide financial meltdown earlier this year.

No one can predict if or when the Japanese bond market will collapse, of course, but rating agencies, the Organization for Economic Cooperation and Development, and the International Monetary Fund have all publicly expressed concern. Aging populations exacerbate pension costs and pay fewer taxes. In Greece, the 65-and-over population is projected to increase from 18 percent of the total in 2005 to 25 percent in 2030. For Japan, the swell is worse, from 19.9 percent to 30 percent.

Until recently, Japan's debt--the total of all annual budget deficits--was allowed to build thanks to the country's unique market conditions. With 95 percent of the national debt held by Japanese, increased government borrowing from its own citizens was arguably nothing more than a domestic transfer--a shift of funds from the right hand (taxes to pay off the debt) to the left hand (interest income for bond holders). As long as interest rates remained artificially low and competing investment opportunities in the private sector limited, the government could manage the bond market without depending on the kindness of foreign lenders. It could tap into the country's savings surplus until the economy recovered.

Except for one unforeseen glitch: the economy never recovered. Throughout two "lost decades," Japan applied small Band-Aids to festering fiscal wounds that drained the country of its dynamism and prolonged the recession. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Kan's Megaproblem
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.