New Japanese Prime Minister Naoto Kan says
his country is at "risk of collapse" with its large deficit, comparing
Japan to Greece and advocating immediate action to prevent a similar crisis. Cries of various countries
being "the next Greece"
have come frequently because if another country were to head toward default, the results could be catastrophic. But are things really
as bad in Japan as they appear?
- A Couple Odd Things About This Statement Business Insider's Gus Lubin
points out Prime Minister Kan's inconsistency: when finance minister,
he "advocated loose monetary policy to end two decades of deflation."
His change in job title coincided with a switch to "crying out about
public debt levels." Putting together a quote from a Credit Suisse
analyst in the Guardian with the examples of California, Hungary, and
the U.S. invoking Greece as a "signal phrase for fiscal reform," Lubin
suggests Kan "may be overplaying the similarity [with] Greece" to drum
up support for new policies. The problem, of course, is that he'll have
to try to "pull off the mythical trick of reducing government spending
while stimulating private sector spending."
- Confirmed: Needless Worry 24/7 Wall St.'s Douglas McIntyre wastes no time making his thoughts clear:
vision of the future is flawed. Japan is the second largest nation in
the world as measured by GDP. It is also among the world's five biggest
exporters. While its national debt is dangerously large, the odds that
it would default on its sovereign obligations are small, particularly
because the country is likely to implement "Europe-like" austerity
- Two Sides to the Story BBC's Roland Buerk,
analyzing the situation, provides some support for Lubin's and
McIntyre's take: "not everyone is convinced Japan, with its huge trade
surplus, is doomed. And Mr Kan may simply be easing the way towards
raising consumption tax and reneging on spending pledges made during
last year's election."That said, he points out that "Pessimists have
long warned that rising debt and a falling population mean Japan is
headed for a point of no return."
- Reasons to Be Pessimistic Catherine Rampell
at The New York Times' Economix blog posts some of the thoughts of one
such pessimist, Edward Hugh, considered "an unheeded Cassandra about
Europe's fiscal problems," now very much in the limelight for his prior
predictions. Hugh argues that the Japanese have been rather "profligate
(at the public sector level), reassured by the idea that since they
print their own money, and the central bank buys up the government
bonds, they don't have a problem, but they do ... One day they will run
out of savings, and they will be catapulted back into inflation with a
vengeance, at which point all hell will break loose in global financial
- Kan's Sense of Urgency Marc Chandler
at Credit Writedowns notes general consensus is that Kan "wants [a
medium-term and long-term fiscal strategy] in hand going into the G20
summit in Toronto June 26-27." What might those plans include? "Among
other things ... a freeze on spending at this fiscal year's level for
the next three years and a retail sale tax increase."
Want to add to this story? Let us know in comments
or send an email to the author at
hhorn at theatlantic dot com.
You can share ideas for stories on the Open Wire.