The End Game: Japan Makes Another Move

It is appalling to see how the Japanese government has screwed over its ordinary citizens who don’t seem to know what might lie ahead. The same goes for Korea as well while it has to deal with slightly different issues. The political leadership has failed to act in defense of the general public. That is a tragedy. It is disheartening to see Japan and Korea destroying the future for the next generation.

From testosteronepit:

It’s a doozie. On December 24, the cabinet approved a draft budget for fiscal 2012 whose headline numbers were horrid enough: ¥90.3 trillion ($1.173 trillion) in outlays, ¥42.3 trillion in tax revenues, and a deficit of ¥48 trillion. 49% of the outlays are to be covered by issuing bonds, a record even for Japan. But it gets worse. Accounting shenanigans gloss over the fiasco by removing two items from the general budget: the reconstruction budget of ¥3.8 trillion and pension payments of ¥2.6 trillion. When they’re included, the deficit jumps to ¥54.4 trillion.

Despite the near-zero interest rate policy the Bank of Japan has been pursuing for years, interest expense on the debt—at 230% of GDP by far the highest in the developed world—will eat up ¥21.9 trillion in 2012, a stunning 51.8% of tax revenues! If yields on 10-year JGBs were to rise from 1% to 2%.... Better not think that way. Keeping yields near zero is simply a matter of survival.

Funding these deficits and rolling over the gargantuan debt has been made possible by the institutional setup and cohesive psychology of Japan Inc.: 95% of JGBs are held within Japan. Individuals directly or indirectly hold over 50%. Government-owned or controlled institutions hold over 40%.

But two of the strengths of the Japanese economy that have supported the absurd deficit levels—a high savings rate and a large trade surplus—have collapsed.

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