January 15, 2013
Those of you who didn’t know the cause of Japan’s debt problems, or perhaps that it even had debt problems, will be happy to know that the NYT has the answers for you. In an article on the new prime minister Shinzo Abe’s plans for economic stimulus and expansionary monetary policy it told readers:
“At the root of Japan’s debt problems was a similar attempt in the 1990s by Mr. Abe’s Liberal Democratic Party to stimulate economic growth through government spending on extensive public works projects across the country.”
That’s good to know. Those of us who look at data on Japan’s debt might have thought that the main reason for the growth of the debt in Japan was the collapse of the stock and housing bubbles in 1990-1991. The economic downturn and deflation caused by this collapse had already raised the debt to GDP ratio by 10 percentage points by 1993 (@$1.6 trillion in the United States), a point at which deficits were still minimal.
We also might not have known that Japan has debt problems. The interest burden of its debt is now roughly 1.0 percent of GDP, lower than the interest burden in United States at any point in the post-World War II era and less than one-third of the peak burden hit in the early 90s. The interest rate on 10-year Japanese government bonds has been hovering near 1.0 percent. This isn’t the sort of interest rate that is ordinarily associated with a debt problem.
That’s why readers are thankful for the information the NYT gave us in this article. If they had just relied on the data, they wouldn’t know these things about Japan’s economic situation.
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