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Japan: A body politic bleeds to death

Japan's government debt is frighteningly large – larger by far than any other country's has ever been. Some Japanese economists contend that because the overwhelming bulk of it is held domestically there is no fundamental problem. Yet others, and most outside observers, reckon indebtedness cannot be overcome by growth or fiscal means and is a threat to worldwide stability.

"Japan is like a man who has settled in a warm bath with a bottle of vodka and has cut his wrists. He is just noticing the pretty pink colour from his bleeding that is beginning to float around him." So says David Asher, director of the Japan programme at the American Enterprise Institute in Washington, who believes that Japan's haemorrhaging government finances are a danger not only to itself, but to global financial stability. He claims that in the government debt Olympics, Japan is the all-time record holder, beating post-war UK, Italy at the start of the 1990s, Mexico in the 1980s or even Germany in 1921. More alarming, he projects that if Tokyo does not get a grip quickly, the government deficit will soar by 2013 to nearly 350% of GDP from the present 140%, with potentially disastrous consequences for the rest of the world.

In Tokyo, government officials take a much more relaxed attitude. The growing deficit, they contend, is of course a matter of some concern but really there is nothing to be alarmed about. When it comes to debts, Japanese bureaucrats claim, their problems are not as bad as those of the US with its huge trade and current account deficits piling up year after year.

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