As of 20 1 1, according to the estimation of the International Monetary Fund, Japan's total debt balance accounts for 230% of GDP. In the past 20 years, the scale of Japanese debt has been increasing, but the interest rate of national debt has always been low. Unlike some European countries where debt crisis broke out, 95% of Japan's national debt is held by domestic financial institutions, enterprises and individuals. So many people think that Japan's debt problem will still be controlled.
But the history of financial markets has repeatedly told people that unsustainable things must not be sustainable. In the long run, Japan's debt problem is bound to worsen. In particular, there have been some turning points in the Japanese economy in the past two or three years. Cracks in the hard ice have appeared, and the probability of a debt crisis in Japan will greatly increase in the next few years.
From "Japan First" to "Japan Debt First"
Japan used to be one of the fastest growing countries in the world. From 1955 to 1970, Japan's real GDP grew at an average annual rate of 9.7%, becoming the second largest economy in the world at 1968, creating a "Japanese economic miracle". During the period of rapid economic growth, Japan has been very cautious about the debt problem.
1947, just after World War II, Japan promulgated the Public Finance Law, which stipulated that government expenditure could not be financed by bonds and loans, and only when financing large-scale public projects could construction bonds be issued with the approval of the parliament.
In the next 20 years, Japan has never used bond instruments to finance its finances. 1965 after the economic recession, the Japanese government issued deficit financing bonds for the first time, but the scale was strictly controlled. By 1970, Japan's debt scale accounted for less than 10% of GDP. 1973 the first oil crisis led to the first negative growth of Japan's economy, and the subsequent large-scale fiscal stimulus policy made the Japanese government begin to use deficit financing bonds as a conventional financing means, and at the same time increased the scale of construction bonds. But it was not until 1982 that Japan's debt accounted for 60% of GDP for the first time.
After 1990, Japan's real estate bubble and stock market bubble collapsed, and Japan's economy entered a "lost 20 years". The ambition of "Japan first" was gradually exhausted, and 20 years later, Japan became the world's first debt. According to the data released by the IMF, Japan's total debt accounted for 68.04% of GDP in190, and rose to 142.06% in 2000 and 220% in 20 10.
Japan's debt scale has grown so fast, mainly because: First, due to the rapid expansion of fiscal expenditure, the government has to borrow to maintain a balance of payments. In order to stimulate economic growth, the Japanese government adopted an expansionary fiscal policy to increase public investment, and the total fiscal expenditure increased from about 4 trillion yen in 1980 to about 8.5 trillion yen in 2000. During this period, Japan's fiscal expansion policy has been repeated many times. When the economy improved slightly, the Japanese government was eager to restore fiscal balance. It's like stopping taking medicine in a hurry before a course of treatment is over, and then getting sick again, which is more difficult to treat.
Second, the sharp decline in fiscal revenue has made the Japanese government unable to make ends meet. On the one hand, tax revenue decreased due to stagnant economic growth, and on the other hand, the Japanese government wrongly implemented the tax reduction policy in the early 1990s, thinking that this could stimulate economic growth. Japan's tax revenue reached its highest level in 1992, and then showed a downward trend. By 2000, the tax revenue was only 80% of the peak period. By fiscal year 20 10, Japan's personal income tax revenue was only 60% of fiscal year 1990, and corporate income tax revenue was only one third of fiscal year 1990.
Third, with the accumulation of debt, the interest expense is increasing, which makes the Japanese government have to issue new debt in order to repay the old debt. In 1980, the total interest that Japan needs to repay was about 440 billion yen, and in 20 12, it increased by nearly 1 trillion yen. According to Rogoff, a famous economist, once the ratio of debt balance to GDP exceeds the threshold of 90%, the debt pressure will snowball with the continuous expansion of interest expenses, and it is difficult to reduce the debt scale.
Fourth, with the aging of Japan's population, social security expenditure is increasing. After the 1990s, the aging phenomenon in Japan became more and more serious, and the proportion of people aged 65 and above in the total population rose rapidly from 9. 1980 to 20.2% in 2005. The Japanese government's social security expenditure budget is increasing day by day, more than doubling from 1980 to 2000, reaching 17 trillion yen. By 20 1 1, Japan's social security expenditure budget has been close to 30 trillion yen.
The Japanese government is not unaware of the expansion of the debt scale, nor has it taken measures to control the debt scale. Starting from 1996, Ryutaro Hashimoto's government raised the consumption tax rate from 3% to 5%, terminated the preferential income tax rate policy, increased the people's burden on medical insurance and reduced public expenditure.
By June 1997 1 1, Japan decided to implement the fiscal structure reform law, hoping to reduce the proportion of government debt to GDP to 60% by fiscal year 2003. Reduce the government deficit to 3% of GDP. However, due to the economic recession in Japan in 1997, and then the East Asian financial crisis broke out, the newly appointed Prime Minister Keizo Obuchi continued to implement the stimulus measures of reducing taxes and increasing public expenditure, and the original reform decree finally became a dead letter. 200 1 Koizumi's government, which came to power, established the "Economic and Fiscal Policy Committee" and launched the program of Japan's economic structural reform.
From 2002 to 2008, Japan's financial situation and debt pressure improved slightly. From 2006 to 2008, Japan's fiscal deficit accounted for about 2% of GDP, and general government debt accounted for about 170% of GDP. However, in 2008, the deterioration of the US financial crisis triggered the world economic recession, and the proportion of Japanese debt in GDP once again expanded to more than 1.80% (except social security funds and short-term loans).
Japan's debt mystery
As of 20 1 1, the Japanese government's general debt ranks first among developed countries, reaching 2 1 1.7%. Another indicator to measure Japan's financial health is the scale of net debt. 20 1 1 year, the Japanese government's net debt accounts for as much as 127.6% of GDP, which is only lower than Greece, which is heavily indebted and deeply in crisis.
Although Japan's debt scale has reached the first place in the world, the interest rate of Japanese government bonds has been reduced, which has enabled Japan to borrow at a lower cost, avoiding the debt crisis while the debt scale has been expanding.
According to general logic, with the expansion of debt scale, in order to attract more investors, the government will have to increase the yield of bonds. The rapid rise of yields in Greece, Portugal and other countries in the European debt crisis is a typical case. Studies on most countries also show that even if initial debt, inflation and other factors are taken into account, rising debt levels will lead to a significant increase in bond yields.
However, since 2000, although the level of Japanese government debt has been rising, the government's fiscal deficit has shown no signs of improvement, and the yield of its 10-year government bonds has been below 2%, even showing a downward trend. By May of 20 12, the yield of Japanese ten-year government bonds had fallen below 0.9%. This is called "the mystery of Japan's debt" by academic circles.
Academic circles have also put forward several explanations:
First, unlike the southern European countries that are deeply mired in the debt crisis, 95% of Japan's national debt is held by domestic institutions and individuals, and it is not easily affected by fluctuations in external confidence. The domestic holding rate of Japanese government bonds is much higher than that of European and American countries. The proportion of foreign investors holding Japanese government bonds decreased from 7.9% in September 2008 to less than 5% in February 20 10.
At the same time, almost all Japanese government bonds are denominated in yen. Even if it is really unable to repay the debt, the Japanese government can start the printing press for financing. Reinhardt and Rogoff pointed out in their famous research on the history of financial crisis that from the historical experience of major countries in the world, the default frequency of domestic debt is far less than that of foreign debt, which has occurred nearly 200 times since 1800.
Second, although Japan is heavily indebted at home, it is one of the major foreign creditor countries. Due to Japan's strong exports and increasing overseas investment, Japan's trade and investment income has been in surplus, thus maintaining a huge current account surplus. During the 30 years from 1980 to 20 10, Japan's current account balance accounted for about 3% of GDP, higher than that of the United States, Britain, Italy and other countries.
Third, Japan's household savings rate has been maintained at a high level, supporting the Japanese government's debt financing. Before 1980, Japan's household savings rate remained at a high level of 20%. After that, it decreased year by year, but it reached 199, still above 10%, still more than 1 times higher than that of the United States. At the same time, most of the household assets accumulated in Japan exist in the form of safe assets such as deposits and government bonds, and the proportion of risky financial assets is small.