Japan — The world’s largest debt zombie is about to fail
Japan is turning from capital exporter into capital importer, which promises to undermine the entire fiat currency system. This is a rapidly evolving crisis which threatens us all.
We are so familiar with Japan’s massive debt burden that we ignore it. It exists not because investors have been happy to buy its government bonds, but because its central bank has been doing so. The Bank of Japan (BOJ) now owns nearly half the government’s enormous debt mountain — that’s equivalent to 115% of the nation’s GDP.
Suppressing interest rates to almost nothing for the last thirty years has made this possible, but for no longer. Japan relies on imported oil, its derivatives, and LNG almost entirely. The crisis in the Persian Gulf is undermining the economy already, pressuring the government to accelerate its debt funding with no buyers for it in sight. Not even the BOJ can come to the government’s rescue. Instead, the Minister of Finance is pleading with Japanese institutions to buy the extra government debt, which will mean selling higher-yielding US treasuries, UK gilts, and French OATS
Japan’s ultra-Keynesian experiment has run into the brick wall of reality, with consequences for us all. This article sets out the seriousness of the problem for us all.
