Ashutosh Agrawal • Thank you Mr. Daryl. Your answer did satisfy my curiosity. But also made me bit wary as you clearly mentioned that Japan is in trouble. I was hoping otherwise as another dip would be disastrous for sure. Even for a growing economy like India.
Kamal Gupta • It is Japan's huge forex reserves
Poonam Arora • Prime Minister of Japan, Naoto Kan has already warned collapse of Japan under its huge debt mountain in its first major speech only. Population of Japan is ageing and as more and more Japanese citizens retire, they would sell their long holded govt. bonds to cover the expenses and Japan would left with no other option but borrowing from global capital market as Mr.Daryl rightly pointed out.
Ashutosh Agrawal • Thanks for the insights. So is it that Japan can afford to not to act for some time longer? If yes, then how long? How long before Japan turns to Global market or tries liquidating its reserves to service the debt?
Kamal Gupta • Japan has to act pretty quickly. It is a rapidly greying society and not immigrant-friendly. If it does not change its immigration policies, it will anyways implode in the next forty years.
Jacky Mallett • Japan is a highly overpopulated volcanic mountain chain. I'm not sure what particular hazard it risks by allowing its population to naturally drop to a more comfortable level, besides the tragedy of its population having to adapt to more living space in Tokyo.
Kamal Gupta • An ageing population means more demanding hands, less of productive hands. You start eating up the capital that you have built up, and then implode.
Richard Di Bona • Interesting discussion – a few observations and possible angles:
Ashutosh Agrawal • Thanks Kamal for clarifying the effect of a contracting population. A contracting population also mean a lower consumption/demand overall. And then the Govt. keeps spending to create demand, hence digging itself deeper into debt. Culturally, Japan does not welcome immigrants and I don't see any signs of that changing.
It seems that factors which are keeping Japan afloat may not long last. But the danger is not immediate, I guess and I sincerely hope so!
Jacky Mallett • Economic arguments based on schadenfreude should be inherently suspect. The simple problem with most of the arguments here is that the productivity improvements of the last 20 years are being ignored. What impact can a dropping population have on production when you have robotic factories being run by a handful of people?
Poonam Arora • Looking at all the aspects of the economy of Japan, it is not wrong to say that its the time when Japan needs to take some actions not only to increase its revenue and reduce expenditure/subsidies but to raise producitivity/intellectual capital and address structual problem of rapidly graying population also. I agree with Mr. Jacky that factories in japan are being run by a few productive people but overall impact of low saving because of ageing population can not be ignored here. Although Japan still has advantage of rising yen against both the dollar and the euro and being the net lender to the rest of the world but these long overdue fiscal austerity measures need to be addressed now.
Sep Van de Voort • Yesterday Standard & Poor's warned that it may lower Japan's debt rating after this weekend's election results. Premier Kan's ruling coalition lost its majority in the Upper House which makes its plans to deal with the public finance problems less credible. Such a down grade by S&P could potentially be the catalyst to open eyes of investors for Japan's immense problems which Ashutosh rightly pointed out in his opening comments for this tread. Not only is Japan a volcanic mountain chain, as Jacky Mallett said, they're dancing on the volcano as well :-)
Ashutosh Agrawal • Thanks Sep for the update with regards to S&P.