Japan’s Worsening Economic and Fiscal Crisis
Japan, now the third largest economy in the world (China has recently assumed the spot of number two) is continuing to accrue worrying economic metrics. For the first time in nearly two years, export-dependent Japan incurred a trade deficit. According to Tokyo, the nation incurred a $5.7 billion negative trade balance in January. The trade figures, however, were not the only troubling development on Japan’s economic front.
Moody’s has just lowered Japan’s debt rating from stable to negative. This comes in the wake of Standard & Poor’s downgrading Japanese public debt from AA to AA-. Japan has the developed world’s highest ratio of public debt to GDP, a figure approaching 200 percent. These recent developments portend the growing risk of a sovereign debt crisis confronting Tokyo. A growing number of investment fund managers are warning that the current trajectory of Japan’s public debt and annual government deficits is unsustainable. Could Japan become the Greece and Ireland of the Far East? These negative metrics, in conjunction with Japan’s aging and declining population, point to a deepening economic and fiscal crisis for the land of the rising sun.