Why didn't Japan have a debt crisis when its debt was 234% of GDP?

That's local currency debt not foreign currency debt that Japan owes. What it owes is domestic debt not foreign debt.

Foreign currency debt, for example, dollar debt, that's solidly paid back in dollars.

Greece uses the euro, owed to the euro debt, Greece can issue the euro?

No, it can't.

First, the debt is rolling, do not need to pay off, as long as the interest can be paid off, and Japan is a negative interest rate countries, in this regard the pressure is extremely small. But some countries, such as India and other countries can not, it has a high interest rate on the national debt, the burden of debt repayment is very heavy.

Second, the Bank of Japan can go straight down to buy treasury bonds, the central bank is a money printing machine, who can still beat the printing machine? Domestic debt is held by the central bank, effectively targeting taxes across the board.

There is only one question here: the Bank of Japan to use the money printing machine, then a steady stream of money printing will lead to hyperinflation in Japan?

No, on the contrary, Japan in deflation. The Japanese government can't wait for inflation.

The problem in Japan is that the money issued by the central bank does not go into circulation and does not stimulate the economy. The pattern of the Japanese economy now is:

1, the Japanese government is short of money, so it issues debt.

2, Japanese financial institutions buy debt.

3, the Japanese government got the money, part of the payment of the cost of debt issuance, part of the use of welfare payments. Welfare spending is the biggest expense of the Japanese government.

4, Japan due to the aging of the reason, the consumption power is not strong, Japan's elderly people get the money and save back to the financial institutions.

5, because of the lack of consumption led to economic depression, economic depression led to the Japanese government continue to lack of money, so continue to issue debt

6, because the Japanese elderly people to deposit money to the financial institutions, financial institutions got the money, and then can buy treasury bonds.

The whole thing is a financial perpetual motion machine, and a lot of money is actually idling in Japanese financial institutions and not going into circulation.

This is the price Japan pays for maintaining financial stability: the economy is bound to wilt.

This is largely because nearly 90% of Japan's bonds are held by local residents or Japanese banks, and the risk of default is relatively low, whereas countries with debt crises, such as Greece, have debts held mainly by foreign creditors, and are therefore at risk of default.

Japan has a strong family, so there has been no debt crisis so far

Currently, the largest holder of Japanese government bonds is the Bank of Japan, which holds more than 40% of the balance of the national debt. Since the 1990s, the BOJ has adopted a quantitative easing policy to stimulate the Japanese economy through tax cuts and increased fiscal deficits, and has maintained ultra-low interest rates for a long time.

Last December, Japan's 10-year bond yields fell to 0%, and in January of this year, Japan's 20-year bond yields fell to 0.4%, through the suppression of bond yields, Japan saves a large amount of interest payments each year, and the cost of financing the new debt is also greatly reduced.

In addition, Japan's home base is rich in financial assets for both businesses and households. Statistics show that in 2018, Japanese companies to overseas companies mergers and acquisitions totaled more than 191 billion U.S. dollars, another historical record, and the amount of cash held by Japanese companies is more than 890 billion U.S. dollars, sufficient overseas assets to the domestic delivery of abundant bond purchasing power.

Household cash deposits, as of June 2018, the amount of financial assets of Japanese households increased by 2.2% year-on-year to 1,848 trillion yen, the eighth consecutive quarter to climb higher, while the liabilities of Japanese households amounted to 300.6 trillion yen, far from the point where the family can not afford.

Debt risk still exists, and the economic growth rate during the recovery period is extremely low

Overall, Japan's overseas net assets (including the total amount of assets held overseas by its own government, corporations, and individuals, such as companies, factories, securities, etc.) amounted to 328 trillion yen (about 19.1 trillion yuan), ranking the first in the world for 27 consecutive years, and the Bank of Japan also owns more assets than its gross domestic product (GDP). It doesn't look like a debt crisis is going to happen in the short term, but there are potential risks to the Japanese economy.

For its part, the central bank, which has long relied on ultra-low interest rates to keep debt-servicing costs down, has been slow to raise interest rates, which has had an impact on domestic bank profits. But Japan's current debt is so high that a rise in the interest cost of debt caused by a rate hike would undo decades of hard work.

In addition, Japan's aging population and low fertility rate is one of the most pressing issues right now. As Japan's population continues to shrink, the old-age support rate will rise further, reaching about 75% by 2050, which means that healthcare and pension costs will rise dramatically.

The Japanese economy is still in a period of economic recovery, but because of too much debt, the average growth rate of the Japanese economy during the expansion period was only 1.2%, a rare low growth rate during the period of economic expansion, and also reflects the paradoxical nature of the Japanese economy, where prosperity and failure coexist.

Some people say that there are three major bubbles in the world, the U.S. stock market, Japan's debt market and China's property market, Japan's debt up to more than twice the GDP, which has long been placed in other countries have collapsed, but placed in the Japanese nonetheless did not collapse, but rather, Japan's small life is still living quite nourishing, in addition to the economy does not grow in fact, it is also okay.

The reason why the total amount of Japanese debt is so high is also fine, which is mainly because of Japan is negative interest rates ah, for example, ah, probably a person to you to borrow 100 dollars, and then tell you a year later to return to you 90 dollars is probably so, although not so exaggerated, but the realization that is the case, so the Japanese money borrowed the more nonetheless will not be a problem, but rather will make money.

Then someone asked, that lending money to the Japanese government is not stupid? Negative interest rates that they keep to spend more good ah, the problem is not so calculated, the yen Japanese bonds are still relatively reliable. And Japan's inflation is also in most of the time is negative, which means that your money is not more and more worthless, but will become more and more valuable, so and negative interest rates offset equal to the value of the money preservation. The rest of the world, including our country, the inflation rate is basically about 5% per year, which means that you have 100 dollars in the first year, the second year is likely to be worth only 95 dollars of this 100 dollars.

And the biggest debtor of Japanese bonds that is still the Japanese government, you say this can be a problem? Japan's bonds are local currency bonds, there can not be a situation where you can not afford to pay back, Japan wants to borrow as much as borrow as much ah, is not the yen? The first thing you need to do is to find a bank that will print it, and how much you need.

And in fact, Japan's biggest problem is the lack of consumption, a lot of Japan's elderly that are worth a lot of money, but the money is willing to put there, whether in the bank or at home, in short, do not spend money, which leads to the circulation of Japan's currency in fact, is very little, want to spend money on young people do not have the money to spend money on the elderly that do not spend money that can not be done, since the people do not have the will to spend, then only the government on behalf of the work, so the Japanese government has no choice. Government on behalf of the work, so the Japanese government a lot of debt to maintain social operations, after all, a project if the product can not be sold, then the factory closed down, and the implementation of the life-long employment system in Japan, resulting in enterprises do not dare to easily lay off employees, then how to do? The government will have to pay for it.

So Japan has become a very weird situation. The government is heavily in debt to act as the biggest consumer, and the people don't spend any money.

We all know that the U.S. national debt is high, but when it comes to the debt ratio (debt as a share of GDP), the United States relative to Japan that is out of reach. As of September 2018, Japan's debt totaled 1,284.4 trillion yen, accounting for about 234% of its GDP, most of the world's countries have debt ratios of less than 100%, and like Greece, a country with a debt ratio of just over 110% on the debt crisis, why Japan's debt ratio is so high, but why did not have a debt crisis? In my opinion, there are mainly the following reasons.

First of all, the ability to borrow money is linked to the ability to pay it back, and a wealthy country can naturally borrow more money. We all know that Japan is a highly developed capitalist country with a strong family background. We may only know that Japan is the world's third largest economy, GDP of 5 trillion dollars, but do you know that Japan has a "Japan of assets" overseas? Japan's overseas assets exceed 1,000 trillion yen, and overseas net assets ranked first in the world. With huge overseas assets and a strong industrial base and manufacturing capacity as a guarantee, the Japanese sovereign debt rating has been very stable.

Secondly, unlike the United States, Greece and these countries have a lot of foreign debt, Japan's debt is almost all digested by their own people. About 95% of Japan's national debt is held by Japan's domestic creditors, and even the Bank of Japan is the largest holder of Japanese government bonds. And the yield on Japanese government bonds is so low that Japan has been able to borrow money at 0.5 to 2% interest rates for a long time. Therefore, although the Japanese government bonds are high, but the interest rate is low, so that the interest paid is not so high.

Furthermore, the Japanese people and our country, like saving money, Japanese individuals and some enterprises have more funds, low debt, most of them have to earn money in the bank, and the money directly or indirectly into the Japanese government bonds, there is no wind blowing, they will not be easy to sell their own government bonds.

Of course, Japan's debt is so high, although interest rates are low, but each year also still have to come up with 20% of the fiscal revenue to pay interest, although not so much as a debt crisis, but high indebtedness is also a heavy burden on Japan.

Hello, because Japan has a strong industrial base and production capacity, this ability to correspond to the yen will not be waste paper, the yen is actually very "hard", it corresponds to the bond is also very hard.

Generally speaking, any country will occur financial crisis in the universal form of:

This is clearly different from our country, in our country to issue debt can not be directly purchased by the central bank, must be purchased through the actual business or entity, as opposed to the behavior of the government to issue debt to the limit. But the behavior of the Bank of Japan, is directly undermined the principle of central bank independence, but also the shame of the Central Bank of Japan.

Japan this direct printing money to the government's behavior, the equivalent of the tax burden added to the people of the country, resulting in harm is mainly due to the central bank completely lost the ability to macro-control of the economy, in any case, can not raise interest rates.

At present, Japan's credit is largely enough to borrow a few dollars from people face is still there. The problem is to pay back the interest, the interest is the pressure. As long as the interest pressure is not high, then the principal is high again, not work, just borrow new debt to make up for the old debt is.

And Japan is more considerable, the national debt interest rate is not 1% per year, many do not have 0.5%, which can borrow money, that is still afraid of what, 10 trillion dollars of debt is equal to nothing. Borrowing new debt to repay the old debt is, the principal will never expire, until the day you can not borrow again.

As for why some developed countries have low interest rates on treasury bonds to buyers almost no return, this detail is complex, the Japanese economy has a lot of things for us, is really very anti-common sense, I will pick simple to say:

To me, Japan has actually been in the crisis, the Japanese economy is still a pool of stagnant water.

Japan's overall wage income, in the past 30 years, also basically did not improve, and even fell. 1998, Japan has basically entered the 0 interest rate era, Japan's economy has been half dead.

To say that the United States has a growth rate of 2-3%, Japan so a pool of dead water down, not to mention by China to leave behind, India in another 20 years may catch up with Japan.

Businesses only want to move overseas because they don't know what to do at home to make money, and they can barely make ends meet. Employment opportunities are OK because the population, especially the labor force, is declining dramatically. Government finances are left to raise taxes, further impacting corporate profits and the people.

Japan is an externally-oriented economy, domestic resources are scarce, the market is narrow, although Japan's domestic population is aging seriously, the decline of science and technology innovation, the government has long strengthened the investment in the stimulation of the economy, but the Japanese economy lasted more than 20 years of downturn, you have to choose the external exports to promote economic growth.

The global debt ratio reached 250% in 2019, we are also close to this level, Japan's 234% debt ratio is still performing well. And the world after the epidemic is opening the water valve of quantitative easing, flooding an ocean. The total debt ratio should be well over 250%.

This is a tiger eating pig game era, not a high debt rate will definitely out of the crisis, because you can use non-stop quantitative easing to short-term risk aversion. And the outbreak of a debt crisis is like the tiger that is hot on the heels of countries' debt problems. As long as it is not running in the last herd, then it will not be eaten by the tiger. Moreover, once the pigs in the rear are caught up by the tiger, then funds will quickly flow out of these countries, forming a Matthew effect, some relatively better countries will be relatively safe.

Japan from the 90s of the last century after the crisis of the Plaza Accord began to enter the quantitative easing policy, to the present day has gone through more than 20 years, one's train station, the airport into a chicken farm, large-scale infrastructure, the debt rate is also high. Even Japan in the role of serious aging under the economic collapse, prices are not seen to rise, into an unprecedented economic situation Liquidity trap.

Japan did not produce a serious debt crisis is in the economic crisis of the last century never come out, in 1995, Japan's GDP has reached 5.4 trillion U.S. dollars, after 25 years of unremitting efforts to finally cross the 5 trillion U.S. dollars in 2019 the trap, 2020 is also reached 5.1 trillion U.S. dollars. But it has been languishing for more than 20 years.

But Japan also has two major advantages, one is that after Japan entered a full-scale economic crisis, industrial revitalization is difficult to move forward, so the game, animation and so on into the public's field of vision, crookedly, so that the animation and the game has become a pillar industry in Japan; the other is that every time there is a big crisis, Japan's overseas enterprises and investors will turn their funds to the country, and the deepening of the domestic crisis. The other is that whenever there is a big crisis, Japanese overseas companies and investors will turn their capital to the country, which eases the deepening of the domestic crisis. The huge overseas wealth, industries and assets are another great advantage of Japan.

However, since the subprime crisis in 2008, the Greek debt crisis, the debt crisis of the five European pigs. As well as the emergence of the debt crisis of Brazil, Argentina, Turkey and other countries under the epidemic was not so lucky. And it is also because these countries were the first to be followed closely behind the tiger and the loss of competitiveness, and eventually became the prey in the mouth of the crisis.

As for the future of Japan's debt crisis will not break out again, it depends on whether Japan can win these chasing game, if Japan is caught up by the tiger behind, it is also bound to produce a huge crisis, not just a debt crisis.

Japan's industrial development has basically stagnated since the 1990s, when Abe came to power and established the so-called "Abe Economics".

But even so, Japan has not been able to boost GDP growth, which totaled $5.07 trillion in 2018, a level at which GDP has hovered for many years since the emergence of Abe's economics.

It is well known that the United States has the highest debt ratio in modern times. According to the International Monetary Fund (丨MF), in 2018, the world's governments have a total debt of 66 trillion U.S. dollars. According to the data released by the U.S. Treasury Department at the beginning of this year, the U.S. government's total liabilities exceeded $22 trillion. That's one-third of the world's total debt.

The U.S. GDP in 2018 totaled $20.5 trillion, which means that the U.S. debt amounted to 107 percent of U.S. GDP. But the United States and Japan have the same form of economy, which is called "borrowing from the chicken and laying eggs". We know that China is the largest creditor of the United States, the U.S. government is really "debt is not poor, fleas are not itchy!" The US government is really "in debt" and "in fleas".

And Japan is different, "borrowed chicken eggs" way at the same time international and domestic and clubs. Japan also borrowed a lot of national debt from China.

The current data released by the Japanese government: total debt of 1284.4 trillion yen, equivalent to the dollar is, 11.5 trillion.

We can see that, as the data indicates, the proportion of the debt that Japan has is actually higher than that of the United States. So why didn't Japan have an economic crisis? There are two reasons: one is to borrow money from abroad. The second is to borrow money from the domestic people, that is, to issue bonds to the domestic. And in Japan, the people in the chain of banks to deposit money is to charge a fee; the other, the Japanese people to deposit money is no interest, or even negative interest rates. And the interest rate of the bonds issued in Japan never exceeds 1%, and usually only 0.3%. In this way, the Japanese government for the financial is how the careful calculation? This stabilizes the basis for the yen not to have a crisis. 90% of the debt paper issued by the Japanese government is bought by the domestic public.

There is another point, Japan owes foreign debt is not much, and then again, Japan in the last century, the stubborn rise, stabilized the Japanese economy a certain foundation. As the saying goes:Poor poor poor, the family still has three quarts of copper. Although it is said that the Japanese people in support of the first government's hardship, but the Japanese government economic direction is still low.

At present, the global debt is 66 trillion, the United States of America's debt is 22 trillion, accounting for 1/3 of the global debt, the United States of America's GDP is 210,000 U.S. dollars, so that the United States of America's indebtedness rate of 107% point more. Japan's debt is $11.5 trillion, while Japan's GDP is $5 trillion, and Japan's debt ratio is more than 224%, so obviously Japan's debt is more than twice as much as its GDP, and its debt ratio is twice as much as that of the United States, but there is no debt crisis in Japan.

Japan did not have a debt crisis because Japan's debt is mostly domestic debt, the ratio of foreign debt accounted for less than 1/10. Therefore, there is no debt default problem in Japan, and when the time comes, if there is no money to pay back, it is entirely possible to raise debt again to repay the old debt with new debt. If irresponsible words can also quantitative easing, print more money, inflation, can solve the problem, the key is to control the degree. In fact, Japan does not need to use this trick, as long as the issue of new debt to repay the old debt. This is also the reason why Japan is highly indebted, with a debt ratio higher than twice that of the United States.

Japan is also a high savings rate country, the savings rate reached 17%, mainly because of the last century, Japan made a big fortune, become the world's few rich people at that time. The Japanese were clamoring to buy the United States, and the result was that the U.S. paper "Plaza Accord" knocked back the prototype. Japan's economy has been in the doldrums ever since, hovering at 5 trillion dollars for a long time. After Abe came to power, in order to stimulate the economy and continue to borrow, the result is high debt, the debt rate rose to this situation.

Also due to the economic downturn, the flow of private capital is not into the production sector, not for consumption, and not even into savings, because savings interest rates are extremely low. As a result, Japanese bonds are very popular in the country. From this side, it can be said that Japan's wealth is hidden in the private sector, on the other hand, can also see the reason why Abe's economics failed to pull Japan out of the downturn.

Is this situation in Japan a boon? Definitely not. The stability of the country's financial situation should first be based on the growth of the economy, borrowing can be, but to be solvent. Secondly, once the endless borrowing exceeds one's ability to pay back, there are only two results: credit insolvency; and inflation. Japan's eventual outcome could then be the second, and as the second outcome comes, it will also lead to credit ruin.

Let's start with two examples to better understand the problem.

Example 1: Xiao Zhang has borrowed 300,000 yuan from an Internet financial microfinance company for a failed investment and cannot pay it back. The lending company has sued Xiao Zhang, and the first trial has ruled that Xiao Zhang should pay back the money with interest, and also have to pay the litigation costs, and at the same time put Xiao Zhang on the list of restricted high consumption, and Xiao Zhang is facing a serious personal debt crisis.

Example 2: King is addicted to gambling and lost 1 million dollars, he himself has no job income, lost all the money is borrowed from his parents. Although he wrote a loan, but not out of the parents have no way, just hope that he no longer continue to gamble on a normal life, borrowed 100 to be able to pay back, can not pay back will not go to court to sue him.