OECD backs Japan deflation fight, but says it must cut debt

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    "...but says it must cut debt." this is very important for credit rating companies and nobody will be surprised if Japan's credit rating is downgraded (atleast by one notch) within couple of weeks.

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    some14some@ the same independent credit rating companies that, as Wall street buckled and Lehman burned, that changed triple A rated securities to nothing in a matter of days.. The very same companies that gave worthless securities rated as F, Triple A ratings, giving it a face value of billions.

    Cutting debt is important, but fiscally viable, socio-political programs that promote sustainable growth, in a sustainable working environment is necessary. But as everyone here knows, people who are smart, individualistic, and has plenty of knowledge in solving such issues, are bogged down by red tape, the conformist status quo, and in all sincerity, societies apathy only makes it worse.

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    Another ridiculous statement from one of the "guiding lights" of the world economy. how to cut debt while pursuing such a monetary expansion is beyond the ability of any government. Witness the ever growing deficits in EU. and now we see that countries are to be permitted to relax their austerity measures - when not one country has yet managed to reduce its deficit!!!

  • 2


    The article reported that OECD has commented that Japan stopping and reversing the rise in Debt to GDP.

    Japan together with US and UK had been piling new debt on top of old ones. Previously Japan debt was supportable because of very low Treasury bond interest rate approx. 0.5%. Investors mainly National Institution s accept this sort of low return because of low negative inflation rate of -0.5%. This gives them a real return of around 1%. However Abe has targeted a 2% inflation rates, which meansTreasury bond issued by BOJ will have to rise to 3% to give investors a real return of 1%. On a debt exceeding 20% of GDP this rate is unsupportable since debt servicing already accounts for 40% of Govt. Receipts at current rates. Japan is really in an impasse. If it continue this massive liquidity injection to create inflation and head either into a debt default because of unsupportable interest rates or into an uncontrollable spiral where BOJ is the only player in the Treasury bond market where everyone else is selling or it stop the plan in progress and let the economy wither away. The temptation must be strong for Japanese Business to invest abroad to protect themselves from the possible Yen free fall which is currently flirting with an exchange rate of 100 Yen to the US dollar.

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