Currently, it takes some time to respond to comments because I have some other things I have to prioritize.

Saturday, October 9, 2010

How dare you say "Japan will go bankrupt"?

Japanese media and comentaters love the word "bankruptcy".
They speak as if Japan would go bankrupt unless the government lowers the expenditure.
Because of the repeated mention to the economic depression, Japanese people fear to spend money in preparaion for emergent expense. Although the Japanese by nature have the disposition to see thrift as good virtue, current Japanese people almost frantically fear to spend money. Japan has as much as 1 quadrillion yen of debt which is close to 10 trillion US dollars. Japanese government do have tremendous amount of debt.
People think this way     DEBT=BANKRUPTCY  because the image is so prevalent.
Japan't national debt has doubled in these 10 years, but it's not bankrupt. Don't you think it's strange judging from the equation?
If japan owed debt to foreign countries, the theory can be the case.
However, more than 90% of national bond belongs to Japan, this means that "Japanese" banks and investers are buying the national bonds using "Japanese currency". What is more,all most all of the rest is issued in Yen too.

Let me give you a good example of     DEBT≠BANKRUPTCY.
Zimbabwe is a country under whats is called "hyper-infration," but the country hasn't lost its sovereignty yet.
This is simply because the country do not owe debt to foreign countries in foreign currencies. As long as the country is purely driven by Zimbabwe dollar, it won't go bankrupt. The Zimbabwan government owe debt to no one but Zimbabwans. So no matter how painful the situation might be, it won't go bankrupt because the country has only to issue the national currency however much needed.

I suggest this extremely simplified equation.       Debt in foreign currency=BANKRUPTCY

Greece went bankrupt. Briefly speaking, the country couldn't issue bond when needed.
Increased amount of EURO in a country affects all the members, thus each country possesses restrained right to issue EURO. EURO members who abandoned ones' original currrencies virtually do not have national currency in its true sense. They have to be dependent on quasi-foreign currency for survival as long as they shall live.
EURO has good aspects too as you can see in Germany, but Greece couldn't benefit in the same way and suffered instead.

Let's return back to Japan's situation.
Why is it possible that Japanese banks buy so much bond? Because there's abundant money saved in banks both from people and companies. Householdings and companies have enough, almost excessive amount of savings. They have only to invest the money, which will soon decrease the amont of national expenditure.
Please remember that they have only to SPEND MONEY instead of the government. I'm not economy major, so I don't know the best balance between the government, companies and people, but at least I'm sure there's inbalance of expenditure among the three.
Company and househyolding sectors need to spend money to decrease the governmental expenditure, and there's no need to fear expenditure since there's absurdly sufficienct amount of money in banks. My impression is that the burned-out from the bubble frantically fears deficit.
Again, Japanese people do not owe debt to foreign countries. It's circulating within Japan.
Government ↓↓ + Companies ↑ + Householdings ↑ = ±0  Such a simple equation isn't it?
Actually Japan earns foreign currency every year thanks to  its strong industry. That means
Government ↓↓ + Companies ↑ + Householdings ↑  + trade surplus ↑ = ↑
This is the fact, this is not an inconvenient truth.
So, the government and the media have only to broadcast the truth. No need to broadcast distorted info like some other countries - what a desirable situation!
Why isn't it acknowledged by peolple?
I assume there are certain people in Japan who don't want strong Japan.

Feel at peace and start spending, when the demand catches up with the supply, GDP will start rising again.

It is horrible that so many people think the government owe debt to foreign countries at present.
The media do not give us proper information. So misleading and treasonable.
I know I have to admit that the irresiponsibility has resulted from indifference to the media and people's lack of thinking.
Every time I have to mention the media...haha...ha...

As I told you I'm not an economist, please be lenient about mistakes.
"Then why did you post this"
I just thought "I need to write something about this" out of passion.

I'll probably revise this post for more accurate information.


  1. I've been reading your blog for a while and I find it entertaining. Keep on going with your work, I like it. Also, a question. Is that true that the Japanese hate foreigners?

  2. Thanks for the comment nomercyy.
    Japanese people generally do not hate foreigners.
    We are simply not used to people with different cultures probably because Japan has been quasi-nation state from its origin.
    There might be some Japanese who dislike foreigners, but they are minorities there's no doubt about it.

    Again thanks for your comment.

  3. No problem, I'll keep on reading it! And another question from a foreigner. Is living in suburbs of Japan as expensive as in cities? I've been to Japan once with my uncle when I was a teenager. I liked it. Now that I'm studying at Uni and think about my future, I thought moving to another continent would be great, try something new, different, fresh. Would it be hard to get a job as an English teacher there? Thanks in advance, nasaki!

  4. Thanks for your quick response, I appreciate it. If I knew how to comment in that article you just wrote I'd comment there, but as I don't see any "Post a Comment" box I thought I'd give it in here. Also, regarding a part of your post. To quote, "There's always huge demand for native English speakers since English language is virtually mandatory in Japanese schools.", don't Japanese people take English studies? I mean the degree etc. to teach English or something in their mother country? And people from countries other than America, Canada or UK which don't have English as their native language are in disadvantage? I mean, people with English as their second language and with a degree have the same chances of getting a job as a native speaker also with a degree? I'm sorry for being confusing, I hope you'll get what I mean. And about the area I'd like to live in, I don't have any in particular. I don't really want to live in rural areas, just rims of cities would be great. Thank you again for your response!

  5. Sorry for the inconvenience. I'm still not familar with blogging. Maybe I should put everything on one page.

    [Don't Japanese people take English studies? I mean the degree etc.]

    Not a few students in English langauge department fail to acquire English langauge.
    Also, people need to go through a tough exam to be a public shool teacher.

    [And people from countries other than America, Canada or UK which don't have English as their native language are in disadvantage?]

    Good question.
    Actually, I'm not sure about this. As long as you can show capability for example by submitting certificates of English skill such as ELTS, I don't think there'll be significant disadvantage. If you can speak another langauge as mother tongue, that'll open another opportunity for language teaching job.

    [English as their second language and with a degree have the same chances of getting a job as a native speaker also with a degree?]

    Teachers who speak English language as second langauge is more likely to give good advice on how to acquire second language, while native speakers tend to teach by intuition.(my image) Just look at the good side of oneself and make the most of it. Some employers might want natives while others want teachers who have undergone the processes of language acquisition.

    Thanks for the comment.

  6. I think you bring up an excellent point, being indebted to your own econamy is not nearly as bad as being in debt to foreigners, in fact it may even be beneficial in ways.

    While such debt dose place a burden on the Japanese government, the money also stays within the country feeding the private sector that will eventualy boost government revenue, similar to tax cuts work (at least for us).

    While no debt is preferable, it's not nearly as bad as our situation (yet alone European countries who are much worse off) where 51% of our 10 trillion public debt is held by non-Americans.

    The situation s alarming for us because PRC holds 1.1 trillion of our debt and that has caused widespread fear for many people as we just do not trust China, yet the government has linked itself to China.

    For me, i can't trust a communist government and that is even moreso now as they are using their economic muscle to try to intimidate others. Japan holds just as much of our debt, and Europe holds slightly more collectively- but i trust Japan and Europe not to exploit our situation and use that as a diplomatic weapon, and hold it over our heads.

  7. [where 51% of our 10 trillion public debt is held by non-Americans.]
    I heard most of the US national bonds were dollar-base, so the US can't possibly go bankrupt either although you might experience deteriorative inflation.

    [i trust Japan and Europe not to exploit our situation and use that as a diplomatic weapon, and hold it over our heads. ]
    I believe Japan has to favor the US in order to ensure the national security, but I'm not really sure about Europe. Some European countries might have to give the US hard time for survival.