Why Japan will avert a fiscal meltdown

If Japan's households are avid buyers of bonds, it isbecause they are Rosetta Stone Language sitting on a mountain of savings -- some 1,400trillion yen ($17,320 billion), compared with approximately 870trillion yen in outstanding long-term government bonds. Japanese workers built up that huge nest egg as they toiledsuccessfully to rebuild their country from the ashes of WorldWar Two. But the young workforce that catapulted Japan ahead ofWest Germany in the 1960s to become the world's second-largesteconomy is now ageing fast. Pensioners are now spending thosesavings. Little noticed by the rest of the world, Japan's householdsavings rate has in fact already plunged to about 3 percent ofdisposable income from a peak of 18 percent in the early 1980s. Despite the government's big budget deficit, Japan stillenjoys surplus national savings, reflected in a current accountsurplus, thanks to high corporate savings and a large incomestream from its overseas investments. Japan is the world'slargest creditor nation, with net external assets of 225.5trillion yen, according to official figures. The question preoccupying economists is how long it willtake for the Rosetta Stone language software savings rate to erode and drive the currentaccount into deficit. At that point, Japan will have to importcapital to balance its books. That's when unexpected shockslike the Sendai quake could trigger a financial as well as ahumanitarian crisis by undermining the confidence of foreigninvestors. "Without policy adjustment, the space for household assetsto absorb public debt will continue to shrink over the mediumterm," said Kiichi Tokuoka, an economist with the InternationalMonetary Fund. In a January 2010 working paper, he said Japan's grosspublic debt could exceed households' gross financial assets by2015 or 2020, depending on the accounting treatment. "Although these results do not imply any specific turningpoint for public debt financing, they suggest that if currenttrends continue, domestic Rosetta Stone Protuguese financing could become more difficulttoward the mid-2010s, placing a premium on other sources offunding, including from overseas," he wrote.

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