• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Many fear that Japanis heading for a public-sector debt crisis.

Extracts from this document...

Introduction

Many fear that Japan is heading for a public-sector debt crisis. The issue of the Japanese excessive borrowing is vital, as it can lead to a debt crisis. Now in Japan, government debt is in danger of getting out of hand, which puts obstacles in the way of a rapid upsurge in sluggish Japanese economic activity. Yet I suppose that Japan is unlikely to suffer such an acute crisis as it was in Mexico, East Asia and Russia in the late 1990s, because Japanese debt, unlike emerging debtors, is in it own currency. However, the build-up of debt looks unsustainable now. The figures of Japan's government deficit are high enough; the budget deficit increased to about 7% of GDP. ...read more.

Middle

Borrowers throughout the ages have generally liked inflation as they wanted to bring down the real amount of its debt burden. And under current conditions, modest inflation would be a good thing for Japan. Besides, if the government runs a primary budget deficit and interest rates exceed nominal GDP growth, the debt will increase indefinitely relative to GDP. Unfortunately, the economic situation in Japan is very similar to that. All these factors give evidence that a public-sector debt crisis can really take place in Japan. Under current conditions, balancing the budget wouldn't be enough to stop the debt ratio from growing, the government needs to aim for a considerable primary budget surplus, but it is a dangerous thing when the economy is fragile and that's why the government shouldn't reduce its budget deficit. ...read more.

Conclusion

And if the Japanese government makes right changes in its policy, the country has a chance to escape a public-sector debt crisis. But even if there is a small chance for the Japanese economy to rebound, we see, that there are plenty of features which give evidence that a situation in the country gets worse. The path of Japan's debt looks unsustainable. The outlook is not encouraging at all. Many rating agencies predict that by 2007 Japan's gross public debt will increase to 200% of GDP. I guess that the Japanese government should implement some rather dramatic economic and financial reforms as soon as possible in order to get out of the recession. If it is slow, not only a public-sector debt crisis can occur, but also the whole economy can collapse. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Economy & Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Economy & Economics essays

  1. Discuss the internal and external causes of the debt crisis, with specific reference to ...

    The Crisis of the 1980's came about from external reasons but the entrenched vested interests in the country from the military, Landowners and multinationals, meant that in a period of high inflation and spiraling debt the country had no solid industrial policy that could cope with this and keep the industrial machine going.

  2. Retailing In India - A Government Policy Perspective

    Impact of FDI: The Global Experience "The single biggest impact of multinational company investment in developing economies is the improvement in the standards of living of the country's population, with consumers directly benefitting from lower prices, higher-quality goods and more choice.

  1. An Empirical Investigation into the Causes and Effects of Liquidity in Emerging

    In the light of these developments this paper examines two main hypotheses: * Are emerging market sovereign bonds and US high-yield corporate bonds linked via their cross-liquidity effects. * Do similar variables affect the liquidity on each type of bond?

  2. Recession, Tax Cuts and Budget Deficits.

    FOMC was starting to raise interest rates to slow down the economy. Then in 2001, the economy went into recession and the FOMC started to decrease interest rates rapidly. In fact, it dropped from 6% in January of 2001 to 1.75% by December 12th the same year.

  1. The Japanese Occupation - Concept of Great East Asia Co-Prosperity Sphere

    As a producer of primary commodities and a market for industrial products, Southeast Asia continued to be dependent on outside economic forces and during the war this had shrunk to the Japanese controlled territories of Greater East Asia. 2. In exploiting Southeast Asia's resources, Japan employed the same methods as

  2. Free essay

    Do high house prices in Trafford deter key public sector workers from seeking a ...

    [6] The average salary in the UK is �26,020 and for only full time employees �31,323. [9] How are house prices determined? House prices are determined by supply and demand (above): how much people are demanding houses and how many houses there are for sale (supply).

  1. Third-world Debt

    Impractical debt management and the dependency on single sectors are major reasons why Africa lags well behind Asia in economic development. The African-style of governing and continuing problems with corruption also greatly hinder growth. After gaining independence, a number of African countries like Zambia and Tanzania, firmly believed in socialism,

  2. US Financial Crisis vs. Economic Crisis

    The first estimates of the total number of executions in the wake of the crisis in the years to come between 3 million (Goldman Sachs, the International Monetary Fund) to 8 million euros (Nuriel Roubini, New York University, Professor economy whose forecasts have a certain weight, because it was among

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work