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Back to the Blog Japan’s Debt Tops One Quadrillion Yen

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On today’s edition of Coffee and Markets, Brad Jackson is joined by Francis Cianfrocca to discuss the new Japanese debt number of one quadrillion Yen, how they got to such an absurd debt level and if Bernanke policy has sent us on the same death spiral.

We’re brought to you by Stephen Clouse and Associates and The Heritage Foundation’s Morning Bell. If you’d like to email us, you can do so at bjackson[at]coffeeandmarkets.com. We hope you enjoy the show.

Related Links:

Japan Enters The Keynesian Twilight Zone As Total Debt Crosses ¥1,000,000,000,000,000.00.
Japan national debt tops one quadrillion yen
Japan Resumes Hyprintspeed Part 2: Presenting…. One QUADRILLION

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  • us_pragmatist

    Having listened to your segment on Japan’s debt, I feel you miss some important points. I will say, Francis has some good insights and understanding.

    First, large debt does not hamper economic growth. The idea that it does, in my opinion, has now been completely shot down by all available data. Francis makes this point. Large debt is generally the result of trying to achieve growth, because growth has not happened at low debt levels.

    Second, demographics. If you look at GDP per working age adult (and not simply GDP), Japan’s growth over the last 20 years has basically been the same as the US. The impact of demographics almost completely explains Japan’s seemingly poor performance. I don’t think the true impact of this is grasp in the discussion.

    Third, Japan has its own currency and can print money, thus it will never default. The only way borrowing rates will increase is IF there is inflation, and inflation is not caused by QE alone (as we have seen in Japan and the US). If there is inflation, the debt will shrink in adjusted terms.

    Fourth, I don’t believe a major crisis or world war is required to exit the zero interest rate policy. What is needed is two things: full employment and sufficient aggregate demand. The main hindrance for the US is likely the second part, sufficient aggregate demand. Even at full employment (~5% unemployment), income inequity is so high in the US that sufficient aggregate demand is likely not be achievable. Therefore, some change in tax policy, or maybe labor laws, will be needed before we can exit the zero interest rate policy. As for Japan, its demographic issues make full employment more problematic, as the working age population is simply too small relative to the whole population.