[LINK] "Does Japan face a Greek-like debt crisis?"

[rfmcdonald]

This Globe and Mail question-and-answer feature is reassuring, in one sense; the problem might be exaggerated. Somewhat.

HOW BAD IS JAPAN’S FISCAL POSITION?

By certain measures, Japan’s debt load is worse than that of Greece.

Japan’s outstanding long-term government debt is set to reach ¥862-trillion ($9.7-trillion U.S.) at the end of March 2011, or 181 per cent of the country’s gross domestic product, the Ministry of Finance says.

If short-term debt is added, Japan’s liabilities will hit 197 per cent of GDP this year and 204 per cent in 2011, the highest among advanced economies and far worse than Greece’s debt-to-GDP ratio of around 130 per cent, OECD figures show.

Similarly, the IMF warned in May that Japan was growing more vulnerable to sovereign risk, estimating the country’s gross debt-to-GDP ratio at 227 per cent in 2010.

WHY DOES JAPAN HAVE SO MUCH DEBT?

Tokyo’s debt burden is a legacy of massive government spending in the 1990s to support the economy as it stagnated following the bursting of an asset bubble.

An aging population has meant rising social welfare costs add considerably to government spending.

Some analysts say Japan’s net debt provides a more accurate picture of the country’s indebtedness. This measures gross debt minus government assets such as public pension fund reserves and foreign reserves.

On that basis, debt will reach around 105 per cent of GDP in 2010, the highest among major economies, the OECD says.

Still, some analysts say Japan would not be much worse off by that measure than Belgium and Italy were in the 1990s, and both nations avoided a sovereign debt crisis.

It's also decidedly not reassuring in that it makes the point that if Japan was to follow a Greek path, the heft of Japan's economy--and its debt--might be such that nothing could save it.