Japan takes the path of -- semi-austerity?

[Hannah Bell]

This is a rather big deal -- Japan handled its own real estate crash by borrowing from its own people's savings for public works -- that era is apparently ending with the threat to its debt rating?


Japan’s Prime Minister Warns That Debt Could Bring a Crisis Like That of Greece


TOKYO — Japan’s newly installed prime minister startled the nation on Friday by warning that it could face a financial crisis of Greek proportions if it does not tackle its colossal debt...

Japan’s public debt, at $9.7 trillion, was close to twice its gross domestic product in 2009. But in contrast to Greece, most of that is held domestically, putting Japan, the world’s second largest economy after the United States, on a better financial footing.

Still, some analysts have warned that Japan’s graying population may begin to retire and cash in their bonds, forcing the government to look abroad for financing. In January, the ratings agency Standard & Poor’s cut its outlook for Japan’s sovereign debt rating, saying that the government appeared to have no plan to start containing debt.

The statements Friday from Mr. Kan appeared to press for an agenda he calls the “Third Way” for the country’s economy. This would avoid the mistakes of previous governments, he has said, by limiting the enormous investment in public works that propped up the economy in the 1990s, while also stepping back from the deregulation Japan dabbled with over the last decade. Instead, he envisions raising taxes and investing heavily in new fields like health and the environment, a move he says will create jobs, raise incomes and bring about economic growth.

http://www.nytimes.com/2010/06/12/business/global/12yen.html

[leftstreet]

1. End game for capitalism

Although sadly, the global peon classes will have to fork over every last penny before this fabulous economic 'system' is relegated to history books.

[Bonobo]

2. Japanese people have big savings unlike Americans.

Japanese tend to be very fiscally conservative. They save money, one of the benefits of what has been primarily a cash-based economy for many, may generations.

They are educated, careful with money and yet they spend it regularly, supporting many small local economies (neighborhoods).

The aging society bit concerns me, though. Also the deflation here can't be good in the long run though it has made eating lunch out cheaper :)

[girl gone mad]

3. Japan's savings rate..

is actually pretty low these days.



Italy, Germany and France all have higher personal savings rates. I think even the US may have surpassed them in recent months.

[Bonobo]

4. Wow! Scary! But remember, that is the savings rate.

It does not indicate money they have already socked away, put into post office college insurance plans, etc.

On edit: I see it also shows the total savings. I guess it has been a harder 15 years or so than I thought.