As its current-account surplus fades into deficit, Japan will be forced to import money at high international rates to finance its government debt. Huge amounts of money creation by the Bank of Japan could temporarily postpone the ensuing debt death spiral.
Monetary easing, however, won’t help Japan address the challenges presented by its rapidly aging population, which will result in restraints on consumption that slow growth and increase the cost of government-debt service as a share of gross domestic product. Furthermore, retirees are consumers, not producers, of goods and services, putting additional strain on those still working to produce enough for their own needs and for the elderly.
Read the rest of the story: Strong Yen Won’t Survive Japan’s Fiscal Cliff.
Japan’s prime minister, attempting to build support for painful fiscal reforms, said Saturday that the country should be alarmed by ratings cuts in Europe and must tackle its massive public debts to avoid becoming the next target.
Japan’s debt is more than twice its gross domestic product, higher than any of the struggling European economies whose fiscal problems have set off a eurozone crisis that has reverberated in markets around the world. Japan’s credit rating was downgraded last year, and Prime Minister Yoshihiko Noda said it could be further harmed if the country is seen as dragging its feet on reforms.
Noda commented during a live TV talk show following ratings agency Standard & Poor’s downgrade of nine European countries, including France, one of the strongest economies in the eurozone.
Read the rest of the story: PM says Japan must tackle debt to avoid rate cut.
By 2030, Japan is projected to go from today’s 5.9 persons in the working-age labor pool supporting each retiree, to 1.9 workers per retiree (see Figure 1). In essence, this translates to a three-fold increase of pressure on the workforce just to support the population base at that time. This issue for Japan, according to the United Nations World Population Prospects, the 2010 Revision study, is higher than most but is followed by Europe, and the US. Even China faces an increasing pressure as we approach 2050.
Read the rest of the story: In a Few Years Nations May Need Us to Work Years Past Retirement Age.
Nissan Motor Co 7201.T Chief Executive Carlos Ghosn said the Japanese governments efforts to rein in the rise of the yen had failed, forcing manufacturers to reduce investment in Japan and shift output elsewhere.
"If the Japanese government wants to really safeguard and develop employment, then something has to be done," Ghosn told Reuters in an interview in New York. "We have been talking about this as an industry for a while. Unfortunately, it keeps happening. It looks like whatever effort has been done so far has not delivered results."
"We have to have some vision of what is going to be the exchange rate landscape," he added.
Read the rest of the story: Japans yen policy puts output at risk: Ghosn.
Finance Minister Jun Azumi says he will not rule out Japan sharing some of the burden related to a bailout scheme for Greece, provided Europe maps out a rational plan that can ease market jitters.
Speaking days after meetings of the International Monetary Fund and G20 that were dominated by discussion of Europe’s sovereign debt problems, Azumi urged each country to make efforts to implement what was agreed at a European summit on July 21.
“Each country should respond to the rescue plan by winning approval from their parliaments, and if they need a larger framework, I would consult with (US Treasury Secretary Timothy) Geithner,” Azumi told reporters after a cabinet meeting.
Read the rest of the story: Japan may share Greek debt burden.
Japan’s debt rating outlook was lowered to negative from stable by Moody’s Investors Service on concern that political gridlock will constrain efforts to tackle the biggest debt burden of any nation.
Economic and fiscal policies “may not prove strong enough to achieve the government’s deficit reduction target and contain the inexorable rise in debt,” Moody’s said in a statement today. The rating is Aa2, the company’s third highest. Standard & Poor’s cut its rating last month to fourth highest.
Today’s move adds pressure on Prime Minister Naoto Kan as his public approval rating slides and he struggles to secure lawmakers’ support for measures to reduce debt, including a possible sales-tax increase. Japanese shares accelerated declines after the announcement and amid tensions in the Middle East. The Nikkei 225 Stock Average slid 2 percent as of 11:07 a.m. local time.
“Politicians will take today’s announcement as a warning sign, but their biggest priority right now isn’t Japan’s fiscal health — it’s maintaining their seats in parliament,” said Yoshimasa Maruyama, a senior economist at Itochu Corp. in Tokyo.
Read the rest of the story: Japan Debt Outlook Lowered by Moody’s on ‘Inexorable’ Debt.