[BicCherry]

Public Debt above 200% of GDP, Is Japan Economy in Ponzi Territory now yet?

Japan Economy has how many zombie / Ponzi companies for a country with public debt at 200% GDP?

When do u think the debt bubble will burst, just like US property prices of 2008, Ponzi values, nobody wants to buy the asset cos all values were obviously hyper inflated once the ruse was revealed.

Japan bank (BOJ) governor already warns of very low funds/ negative current account budget for over 10 years.

So next major disaster could be a tipping point for Japanese finances. The Japanese people will stoically accept high inflation along with retrenchments as well. The most elderly people bravely starve themselves to death, to save gahmen expenditure and so that their pension companies don't go bankrupt, so the younger elderly can enjoy at least a few retirement years, before they too must harikiri/ self sacrifice/ suicide after just a few years of retirement?

What do u think will be the social/ economic outcome?

Government hospitals stop treatment of elderly above a certain age level if there is a shortage of government funds? What will be the outcome?

https://www.cnbc.com/2023/01/23/japans-finance-minister-warns-of-severe-finances-as-boj-struggles-to-contain-yields.html

[Steve_American]

Well, as a student of MMT, I can say with certainty that the Japanese Gov. will not run out of money.
Japan may not have enough resources for all its people, but it will not run out of money.
Peter Zeihan says that demographically Japan is fucked. It has too many old people and not enough young adults.
So, Japan may have a huge problem with its economy, but it will not be from a lack of its yen.
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[Steve_American]

It so happens that Prof. Bill Mitchell's blog of today has a post on this topic.
[Note that, there is a 2nd topic on "long covid".]

Bill has just returned from months in Japan. Basically, he asserts that the BoJ is not going to follow other central banks and raise interest rates, period. Also, the Japanese Gov. will do something like send the people checks to help them pay the higher prices of imported goods. That the Japanese Gov. knows that it can create all the yen it needs to, in this case, because the goods are being imported, meaning there is not a shortage of them.

The 1st paragraph is =>

Its been around 9 months since the central banks of the world (bar Japan) started to push up interest rates. This reflected a return to the dominant mainstream view that fiscal policy should aim to support monetary policy in its fight against inflation and thus be biased towards surpluses, while central banks manipulated interest rates to deal with any inflationary pressures. The central banks would somehow form a ‘future-looking’ view that inflation was about to spring up and they would push rates up to curb the pressures. The corollary was that full employment would be achieved through price stability because the market would bring the unemployment rate to a level consistent with stable inflation. So full employment became defined in terms of inflation rather than sufficient jobs to meet the desires of the workforce. This is the so-called NAIRU consensus that has dominated the academy and policy makers since the 1970s. During the pandemic, it was abandoned and there was hope, particularly after statements made by the US Federal Reserve that this approach had unnecessarily resulted in elevated levels of unemployment for decades, that central bankers would target low unemployment as well as price stability. Progressive economists, of course, rejected the whole deal, noting that monetary policy shifts created uncertain distributional outcomes (creditors gain, debtors lose when rates rise) and also rising interest rates add to business costs which provoke further price rises. Anyway, after a short respite from this pernicious NAIRU logic, we are back to square one with central banks pushing up rates. The Bank of Japan is now standing, again, in the wilderness, resisting this logic and demonstrating how government should deal with the sort of pressures being felt around the globe. And who isn’t happy? The grandstanding financial markets who thought they could make a quick buck but have come up against an ideology that rejects their claim to dominance. That is a happy story.

Later, Bill writes =>

This morning (January 26, 2023), the Bank of Japan published a – "Summary of Opinions at the Monetary Policy Meeting" on January 17 and 18, 2023.
It is clear they have a superior understanding about the current situation to that expressed by central bank boards around the world.
The Bank notes that:
. . . "The year-on-year rate of increase in the consumer price index (CPI) is likely to be relatively high in the short run due to the effects of a pass-through to consumer prices of cost increases led by a rise in import prices. The rate of increase is then expected to decelerate toward the middle of fiscal 2023 due to a waning of these effects, as well as to the effects of pushing down energy prices from the government’s economic measures …
. . . The year-on-year rate of increase in the import price index has decelerated clearly, and upward pressure of costs, which has driven price rises, has started to wane …
. . . Progress in the pass-through of cost increases has led to improvement in corporate profits and to active wage hikes and investment. In this situation, a virtuous cycle has started to operate somewhat, in which such developments bring about further improvement in profits and additional wage hikes through higher employee engagement and through creating innovation."

So:
1. The current inflation is transitory and does not warrant interest rate rises.
2. Fiscal policy can deal with the rising imported energy prices – including subsidies to households to cushion the cost-of-living pressure.
3. The peak in price pressures is passing.
4. It is ‘virtuous’ that profits AND nominal wages are rising. You won’t find that sentiment expressed elsewhere where policy makers have been demanding workers accept real wage cuts.
On monetary policy, the Bank noted:
. . . "Considering the outlook for prices, at present, it is important for the Bank to continue with monetary easing and thereby firmly support the economy and realize a favorable environment for firms to raise wages …
In order to encourage firms’ efforts with regard to business transformation until sustained wage increases can be expected, the Bank needs to curb interest rate rises across the entire yield curve while paying attention to the functioning of bond markets."

So:
1. The objective is to create a higher wage, higher productivity economy – the opposite ambition to other nations at present.
2. The Bank must do everything to maintain stimulus to allow activity to increase to support wage increases.
And further on [the BoJ had to say on] monetary policy – and a subtle warning to financial markets:
. . . "It may take some time for the market to calm down and for market functioning to recover. The Bank should carefully explain that it needs to continue with monetary easing, that its accommodative policy stance has not been changed, and that it will take time to achieve the price stability target of 2 percent in a sustainable and stable manner because wage increases have not yet become full-fledged …
. . . There has been upward pressure on long-term interest rates, and the distortions on the yield curve have not dissipated. Given this, the Bank should curb interest rate rises across the entire yield curve through measures such as increasing the amount of Japanese government bond (JGB) purchases and enhancing the Funds-Supplying Operations against Pooled Collateral."

There is more.
The link => posting.php?mode=reply&f=9&t=183243#preview

As for the title of this thread. Actually, the Japanese debt/GDP ratio is now almost 300%.


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[Puffer Fish]

Japan's economy has been in the slow process of deflation ever since their "lost decade".
This hasn't been entirely a bad thing. Land and housing prices have been going down (after being adjusted for inflation), making things more affordable to younger people, although a very large proportion of the wealth still rests in the hands of the older generation.

I doubt anything in Japan can really "pop" now, but it will just lead to a slow continued process, already in the direction of what has been happening. It will put a hamper on Japanese economic growth. There will be inflationary pressures, but these will also be partly cancelled out by the continued deflation of the economy. Although lowering population could also add additional inflationary pressure.

[Puffer Fish]

I think high government debt always creates the risk of an economic bubble that could collapse. It might contribute to a bursting bubble caused by other factors. This would lead to a recession.
Someone is ultimately going to have to pay that money. What happens when the people finally realize that they have to start paying it? When the debt becomes so big it becomes a necessity to start dealing with it. It's going to suddenly move money out of the economy. Wealth that people thought they had (in the form of government debt) will only be able to continue to exist if taxes start being taken out of the economy to pay them (meaning either higher taxes or lower government spending in other areas). When you suddenly take money out of the economy, it is going to cause problems. People thought wealth was going to continue to flow, when it is not possible for that to happen. A lot of the wealth that individuals have saved in the Japanese economy is really in the form of debt to themselves.

With gradually accumulating medium amounts of government debt, usually what happens is a lot of that debt gets turned into the form of inflation. Government spending more money by borrowing it can be equivalent to inflation. Well, at least partially.

The thing is, anyone could be able to see this logically. But people do not feel it in their day to day lives. And current spending levels are based on how people feel in their individual lives and what they can see in their individual household finances. It's hard to take into account the existence of some extraneous government finances that will end up affecting them. Government spending in Japan makes up 42.52 percent of GDP. If there is any significant decrease in government spending, if the government has to start paying down debts, it is going to have some big reverberations in the country's economy.

[Steve_American]

I think high government debt always creates the risk of an economic bubble that could collapse. It might contribute to a bursting bubble caused by other factors. This would lead to a recession.
Someone is ultimately going to have to pay that money. What happens when the people finally realize that they have to start paying it? When the debt becomes so big it becomes a necessity to start dealing with it. It's going to suddenly move money out of the economy. Wealth that people thought they had (in the form of government debt) will only be able to continue to exist if taxes start being taken out of the economy to pay them (meaning either higher taxes or lower government spending in other areas). When you suddenly take money out of the economy, it is going to cause problems. People thought wealth was going to continue to flow, when it is not possible for that to happen. A lot of the wealth that individuals have saved in the Japanese economy is really in the form of debt to themselves.

With gradually accumulating medium amounts of government debt, usually what happens is a lot of that debt gets turned into the form of inflation. Government spending more money by borrowing it can be equivalent to inflation. Well, at least partially.

The thing is, anyone could be able to see this logically. But people do not feel it in their day to day lives. And current spending levels are based on how people feel in their individual lives and what they can see in their individual household finances. It's hard to take into account the existence of some extraneous government finances that will end up affecting them. Government spending in Japan makes up 42.52 percent of GDP. If there is any significant decrease in government spending, if the government has to start paying down debts, it is going to have some big reverberations in the country's economy.

Actually, relying on bank loans to increase the money supply is more likely to lead to a bubble. We saw this with the GFC/2008. It wasn't Gov. debt that caused it, it was private debt.

No someone is ever going to pay to pay down the US or Japanese national debt. The debt is paid on time by selling new bonds. The rich will always do what is necessary to avoid a default, because they own the bonds that will lose value in an actual default. Currently the Fed can buy bonds that were just sold letting that buyer make an overnigt profit with zero risk, with out tying up their dollars.

The UK, aka Englaand, has had a debt at the end of every year since 1694, for 328 years now. At the end of every decade it was larger than at the start of the decade. So, it has never been paid down much. Where are the problems that you see happening as a result of that? The current problems are a result of austerity, not of over spending. They come from covid and shortages. Certainly nobody is being farced to pay the UK national debt down.

Yes, going whole hog and spending buy selling bonds to fund sending a check to every adult subject of the King for $150,000 Ponds would caue inflation. So, what?

MMT only asserts that worrying about the size of the deficit is worrying about the wrong thing. The Gov. agency should be having its economic experts looking at the labor and real resources that will be needed to implement the proposed new sending. If there is not enough resources, then the sending may be a bad idea. Or, if it's necessary then the Gobv needs to find a way to get the resources or free up the resources so the sending doesn't cause inflation.
An example of this that MMTers use is - in an African Br. colony, the col. gov. wanted to hire the locals to build a road. It offered to pay with Pounds. No locals came to work becaue they didn't need Pounds. So, the col. gov. instituted a "hut tax" to be paid with Pounds. Now the locals wanted to work building the road because they needed Pounds.

Are you ever going to refute my assertion that deficit spending that is matched by selling bonds to someone, that the Fed doesn't buy with QE, will never lead to much inflation. This is because the dollars spent into the economy with the deficit spenfing were pulled back out with the bond sales. If the dollars are tied up in bonds, how can they be used to bid up prices of stuff in the econoy? Please explain how they can and must do this. This is your assertion, back it up.
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[selfpubnick]

The public debt of the japanese state is primarily owned by Japanese citizens and is regulated by the japanese law. Its dynamic is very different from that of the US debt, a large part of which is owned by China.

Japan is pressured into accepting the multicultural immigration model of the West.

[Steve_American]

The public debt of the japanese state is primarily owned by Japanese citizens and is regulated by the japanese law. Its dynamic is very different from that of the US debt, a large part of which is owned by China.

Yes, China has bought a lot of US binds. So what?

China has a lot of dollars because the US moved a lot of factories to China, so the US buys a lot from China. A side effect of this is China ends up with a lot of dollars. This can be bad, but it has nothing to do with the national debt. China can either hold the dollas as cash and earn no interest, buy US bonds, or sell its dollars at a loss to someone else who will want to buy US bonds.

This meme that China holds our debt is just scare tactics.

The US doesn't even need to sell bonds. It only does it because when we had the gold standard, selling bonds to fund deficits kept the amount of cash that could be used to demand gold much lower. Now that the world is off the gold stndard, selling bonds is just a habit from a long gone gold standard era.

The Fed put out an official paper years ago, that admitted that during WWII one of the 1st laws passed was one to allow the Fed to buy bonds directly from the US Gov. This didn't cause any problems then or post war. If it became enough of a problem now such a law would fix the problem. If we decide to keep selling bonds. But, it is totally a choice. As is the interest rate the Gov. pays.