According to Ministry of Finance statistics, in the current 2011 fiscal year accumulated central and local government debt has already reached 229.1 percent of Japanese GDP on a gross basis, and 127.8 percent on a net basis. By comparison, the numbers for the U.S. are 99.5 percent (gross) and 72.4 percent (net); for Italy 120.5 percent (gross) and 100.6 percent (net); for the UK 83 percent (gross) and 75.1 percent (net); for France 87.6 percent (gross) and 77.9 percent (net); and for Germany 80.1 percent (gross) and 54.7 percent (net).
Already the world’s most indebted OECD country by far, Japan has in recent years been adding to the deficit at clip exceeded only by the U.S. Japan’s fiscal deficit in FY2011 was 10 percent of the GDP, compared to a deficit of 10.8 percent of GDP in the U.S., 8.6 percent in the UK, 6.0 percent in France, 4.3 percent in Italy, and 2.3 percent in Germany.
As I have written before, at the current pace of accumulation, within a few years government debt will absorb all the savings in the Japanese private sector, hence requiring financing from abroad. This almost seems an inevitability. What seems also inevitable is that foreigners will demand higher interest yields.