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Japan's Troubling Economy

Updated on February 11, 2017

With the bursting economy nowadays, people are easily fooled by the illusive outward aspect of some seemingly developed countries. Most people seem to view Greece as a country on the verge of bankruptcy due to the large amounts of debt under its name, but shockingly Greece does not acquire first place when it comes to the amount of debt.

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Japan is one of the fastest rising economies after WWII, yet its government debt has reached an enormous figure ($10.46 trillion) that makes the Greek debt ($323 billion) pale in comparison. How did Japan, a technology powerhouse acquire so much debt? A reason that contributes to this phenomenon may be the government’s efforts to revive its economy, which is speeding downhill after the year of 1991. This fast decline is due to the bursting of the Japanese asset bubble, during which period is most commonly referred to as the lost decade. The government lost tremendous amounts of money during that period, and even more later on by investing large figures into the Japanese market hoping to revive it, which sadly had little effect.

Another reason is the large amounts of pension that burdens the government. As the gap between the number of working class and senior citizens eligible to receive a pension widens, heavy tax burdens are laid on the shoulders of the working class and the government, leading to the Japanese government desperately in need of methods to encourage the rate of childbirth. Aging population is a common problem in many countries such as Germany and China, but the problem is especially significant in Japan.

The given reasons are just the two most influential factors out of many. Although the Japanese government has an alarming amount of debt, I find it unlikely that they will declare bankruptcy within this decade, given its overall economic wellness (e.g. its technology empire, its anime industry, its tourism and exports all contribute greatly to its economy) and the financial state of the country. If you judge a country’s financial capabilities simply by its outward appearance, the truth lurking behind will most definitely shock you.

The Lost Decade

  • The time after the Japanese asset price's collapsed within the Japanese economy.
  • Over the period of 1995 to 2007, GDP fell from $5.33 to $4.36 trillion in nominal terms.
  • Real wages fell around 5%, while the country experienced a stagnant price level.
  • The economic effect of the Lost Decade is well established and Japanese policymakers continue to grapple with its consequences.

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      Howard Schneider 16 months ago from Parsippany, New Jersey

      This is certainly a very disturbing situation for Japan and the world. A Japanese collapse would lead to huge ripple effects around the globe. This should be a cautionary tale for other nations such as the United States. Excellent Hub, Christine.