Japan’s Fiscal Crisis Comes of Age
The only reason that Japan has been able to sustain its fiscal position is that 93% of its debt is domestically held. But the large number of households formed by pensioners is growing larger still – and is increasingly drawing down savings that were mostly used to purchase government bonds.
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TOKYO – Has Japan’s political paralysis finally lifted? The recent agreement, after a long debate, between the government and leading opposition parties to double the consumption tax – from 5% to 8% in 2014, and then to 10% in 2015 – suggests that it has. But there is a real risk that the government will mistake this measure for the end of the reform process. In fact, it is – or should be – only the beginning.