Japan and US: Much of a Sameness

There’s too much of a sameness about Japan and the USA today. The Land of the Rising Sun and good old Uncle Sam have been copying each other far too much and now it seems as if they are railroading on the same train to the Land of Debt. If they don’t derail soon, then they should at the speed they are accruing that debt for their nations and emptying the already-bare coffers.

Japan is on target to spend $257 billion servicing its debt in the coming financial year. The country has borrowed and borrowed until the geisha girls were all whacked out and now it’s time to pay back the burden of all of the excess. The US is tied into its Quantitative Easing program and won’t be getting out of their straight-jacketed posture in the padded cells at the Federal Reserve. You’d have to have been stark raving mad to have come up with the bunkered idea of printing money and thinking it was going to solve the problems of the economy as if by magic. Give me a hand and I’ll take your arm too, but in the end there won’t be anything left to offer anyone. They’ll just run out of ink or the presses will pack up because the electricity bill hasn’t been paid.

The Japanese Ministry of Finance is going to make a request for 25.3 trillion Yen ($257 billion) according to documents that were obtained by Reuters today. The state budget will include the astronomical debt-servicing costs that have never been seen before.

It really does seem highly surprising that two of the countries that have largely had the same type of economic program with regard to unconventional monetary policies are both running into the same difficulties today. The Surprise is perhaps only half-fainted, however.

The US reached its debt ceiling (of $16.7 trillion) long-ago and needs to find some more money quickly before things start closely down and the country goes into liquidation like Detroit; and the White House has to start running on half its budget or the National Security Agency can only monitor half of the people in the world rather than all of them. The US went bankrupt decades ago and they have been fooling the world into thinking that debt is good. It was for a while, until the others got into debt too.

The aggressive Quantitative Easing of Abenomics in Japan is mirrored by the Seductive Quantitative Teasing of the USA. The former commits seppuku ritual suicide, disembowelment of economic principles, with radical public investment and hardline Quantitative Easing. The latter believes that it is possible to cajole the American people out of their economic torpor with promises and tricks to hoax them into believing that unemployment was going to fall and the economy boom. Now, both countries, laden with more debt are burdened with the saddleless horse to ride off into the sunset on.

Japan has to increase the money that will be used to service its debt for the coming fiscal year (starting April 1st 2014) by 13.7% in comparison with the budget that was allocated this year. The fiscal stimulus has only added to the debt of the country in an attempt to revamp the economy and boost activity. There are also added problems of the demographic structure of the country and the increasingly ageing population that Japan has to deal with. This means increased health costs.

  • Japan’s public debt stands at 1, 000 trillion Yen today ($10.46 trillion).
  • That’s twice as high as the Japanese economy right now.
  • The size of the Japanese economy is $5 trillion.
  • In 2013, the number of Japanese over 65 went over the 30-million mark for the first time and now represents 24% of the total population.
  • Children under the age of 14 years old are now nothing more than 13% of total population and total population dropped by 284, 000 in 2012 (to 127.5 million people).

Years of stimulus have resulted in debt-struck countries and Japan and the USA are at the top of the list. Both countries have foolishly been living on borrowed money. Since time is money, it also means that they have both been living on borrowed time too. It had to happen and there was no other outcome possible. Greece is child’s play and toddler-antics in terms of their 165%-of-GDP debt.

  • Japan’s national debt  is 211.7% of Gross Domestic Product.
  • The debt-to-GDP ratio has done nothing but rise since the financial crisis.
  • In 2008 it stood at 167%, rising to 174.1% in 2009.
  • It shot through the roof in 2010 to 194.1% and so it went on.
  • The US comes out marginally better. In 2008, it was a meager 64.8% debt-to-GDP ratio.
  • By, 2012 it had shot up to 99.4% and today stands at 101.6%.

Japan and the USA like to think that they are at opposite ends, with the USA standing over Japan, China sandwiched in between. But, they are just the same. The time bomb is there in the vaults of the Federal Reserve and it’s there too at the Bank of Japan.

The question is: will it take Obama and Abe with it when the debt explodes and the fallout settles? Probably not, but it will most certainly take the country.

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tothetick

Professional team of writers/analysts analyzing the financial markets.

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