I often talk about the problems of the United States economy but there is a nation that is about to go into a death spiral right now. That nation is Japan. Because of debt, aging population and a nation that is having few children, Japan is about to go into a economic and demographic death spiral from which it cannot recover without defaulting on their debt and without a new economic world order being established.
Japan just went through two lost decades where the economy has been flat but they have seen nothing yet. Facts don’t lie. National suicide is not a understatement for Japan if you look at the economic and demographic facts and figures.
Japan’s national debt is 200 percent of its GNP and projected to go to 250 percent by 2015. This is almost twice the debt load of any developed nation in the world. The only way Japan gets away with having so much national debt is that it has been owned to themselves. Japan’s government is borrowing for their huge budget deficits and paying people in Japan ridiculous low .o5% interest rates to finance the debt. This only can be done because the Japanese people historical have been a nation of savers. They have made more money than it takes for them to live and they have saved the surplus.
However, here lies the fatal problem for Japan and it cannot realistically be resolved. Their population is rapidly aging and their saving rate as a result is now rapidly falling. People reaching old age sell their bonds so they can live in their retirement. The savings rate in Japan has fallen from about 15 percent of their income in the 1990’s to about 2 percent today and it will go into negative territory as more old people cash in their savings to live on in their retirement.
Right now Japan pays over 60 percent of its entire tax revenues just to pay the interest on their nation debt and that is with an interest rate of only .05% . When the aging Japanese are forced to sell these bonds to foreign investors because there are not enough young Japanese to buy them anymore they will have to pay world interest rates. The only reason foreign investors have also been willing to buy treasuries paying .05 percent Interest is that the Yen has been steady appreciating against other currencies, so they make their money when they convert it. But, with the increased selling for retirement and the debt threat to Japan, the Yen will stop appreciating and even fall, and then world investors will demand more normal or even high risk interest rates.
Do you realize that if world investors demanded just 3.5% interest rate returns on Japanese bonds, that all the money that Japan collects in tax revenue would not even be able to pay the interest on their national debt. Japan would then have to default.
Its not even a matter of if Japan will have to pay that interest rate, it is just a matter of when. Japan is the third largest economy in the world with an economy on par with China. If Japan cannot pay its debts and goes into default the fat lady will have sung for the world economy.
If you look at the demographics of Japan you cannot help but notice the rapidly aging population with falling population numbers. They could not possibly continue to pay the interest on their huge national debt. The population of Japan peaked around 2000 and from then until at least the end of the century the population will rapidly be in decline. By 2100 Japan will only have about a third of the population and only have one third the working force that it has today. But, the debt crises will arrive long before then. In fact, the run on the Yen causing the demand for higher interest rates could happen tomorrow.
Remember Greece? There would have been a major world economic crises if Germany and the IMF had not bailed out Greece. But Greece only owes about one half per capital on the national debt as the Japanese and Japan’s economy is 14 times larger than that of Greece. So to put things in proper perspective we are talking about a crises about 25 times as large. Who will be able to bail out Japan? It simply cannot happen. Large investors in Japanese treasuries are going to go bankrupt or they will be bailed out by their own national governments. But, who will bail out the Japanese that are holding treasuries that the government cannot pay? What happens to a nation that cannot pay the debt it owes to its own people and cannot borrow more even to run national government? Seems we are about to find out.
Right now the Yen is at an all time peak but you know how these bubbles work. They peak, the bubble cannot be sustained, and then the bubble collapses. If you look at the demographics of Japan it is obvious that those that bet against the appreciation of the Yen in the long haul really cannot lose.
I guess the only thing that could change the age imbalance demographics in the short term is for Japan to open its doors wide open to highly skilled young immigrants. That would have to occur for a period of several decades with new immigrants continuing to replacing the old and dying. However, you know as well as I, that this will not happen in Japan. I guess they could keep raising the retirement age in Japan, but the workforce numbers would still continue to decline as the Japanese die off and I doubt if a workforce of old old geezer could be competitive on world markets.
So you might watch the Yen and Japan. While we in the United States tend to focus on the problems in America, a time bomb that could destroy the world economy is now rapidly ticking away in Japan. You will find more information and graphics outlining the dire Japanese problem on this page.
Maybe we can offer them a bailout! Or should I say Obama can offer the bailout. ‘Cause otherwise we’re racist, right?
Wow, this is amazing. For some reason I thought that Japan’s crisis was a decade in the past and they had gotten their house in order.
It’s like a “dam” is getting ready to burst with all these things stacking up!
Yes, Japan’s economy is in dire trouble. But, the demographic situation isn’t all that bad. Their population will continue to shrink. That’s ok, because the Japanese are smart, they look out for themselves. Japan is about 98% ethnically Japanese. They don’t plan on importing immigrants. So in 50-100 years, Japan will still be about 98% ethnically Japanese. They know how to protect their culture. I’m a die-hard capitalist, but some things like preserving your homeland, and culture is more important than a big screen TV or driving a sports car.
Compare Japan to Europe. The European leaders have squandered the treasures of Europe. They’ve opened up the flood gates to import foreigners, people from the third-world who are colonizing and settling the continent of Europe. Mosques are being built across Europe. Christianity is being replaced by religions from the third world. The indigenous Europeans are being bullied by their own governments to support their incoming replacements. IT guys lament how they have to train their replacements from foreign countries. The same is happening to the poor European family. Unlike the Japanese, in 50-100 years the poor European on the street will become a minority or at the least, a second class citizen in his own country that he’s indigenous too!
And for what? So people can have more electronic gadgets?
The real reason for the replacement or maginalization of the indigenous Europeans is prevent one of those countries from breaking away from the new world order and resisting it. They saw how tiny little England practically conquered much of the world. They saw how it took most of the industrialized nations of the world to stop Germany. They don’t want one of these European nations having a Christian awakening and starting a dominno effect.
The whole point of this article is that Japan cannot continue to pay its debts with rising debt and a falling population. Therefore, at some point they will default on their debt and cause a world economic crises.
Don,
I really look to you a lot to keep up with what is happening from a Biblical perspective as I have found you to be one of the few who write with a more scholarly approach. However, I would like to make a request. Could you add some references to your articles? It’s not that I so much doubt what you are saying as much as it adds even more credibility as I discuss these issues with others. I reference you often. For example, I found this article, http://e.nikkei.com/e/fr/tnks/Nni20100514D14JFN04.htm, supporting what you are saying here. Thank you again for all your hard studying and keeping up with important issues.
Jon, if you look at the end of this post you should see a link to an article that is referenced.
I do add references in most articles they are in red. Sometimes I will even come back to a recent post and add a later reference if it adds to the post.
However, as I said in other posts very few people click on these links so putting in a lot of references really becomes a waste of time. Also realize that much of what I say is just my own opinion so there are no references for that.
Thanks Don, sorry ’bout that, didn’t get to the end of the article before I commented. I understand why you don’t give too many links but here is one fan of your website who appreciates the links and uses them. The one you gave here is a good one and now I have another resource to turn to as I do my own study.
I have a lot of Japanese friends and when I ask them about their economy they all say the same thing, â??it is not goodâ??. Although they donâ??t really feel the pressure of the recession since their job salaries are way better than that of our country, I could still see why they say that their economy is bad.
Their wages might be higher than ours but so is their cost of living.
The aging population in Japan is a serious problem. I also feel sad for them because of the recession and the huge calamity, the recent tsunamiâ??s and earthquake, that hit them.
So, what about this? Japan is also suffering right now from a serious nuclear leak that is going unnoticed by the media. Radiation is a much greater threat than economy at the moment. If you add on to that the devastation of the earthquake and tsunami, Japan is facing a very real threat to its existence as a player in the world. What will happen when (notice that I say when, not if) Japan collapses as a nation?
When Japan collapses as a nation the whole economic system of the world also collapses. Of course that may happen anyway even apart from Japan from the US or the EU even before the demographic problems hit Japan.
Anya and Don,
I don’t know how much more clear the definition, “perilous times” could apply.
It seems to me that the world is hanging on by a thread at the moment.
You have seen nothing yet, it gets much worse.
Who would have thought that Japan owes that much? And with the recent catastrophic events that happened with Japan, I am not sure how much longer can they sustain doing such.