Japanese Gov't Debt, Already Largest In World, Set To Explode Again

http://www.bloomberg.com/apps/news?pid=20601087&sid=akgf25ofxSLo

DPJ Spending to Worsen Japan Debt Burden, Credit: Chart of Day
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By Theresa Barraclough and Shigeki Nozawa

Sept. 4 (Bloomberg) -- Democratic Party of Japan spending plans will expand the nation’s debt, already the world’s largest, to the point credit risk will increase, according to Mizuho Investors Securities Co.

The country will be forced to issue more bonds to pay for tax cuts and child care measures pledged by the party, driving up yields on 10-year securities by about 20 basis points to 1.5 percent by year-end, said Koji Ochiai, a senior market economist in Tokyo at Mizuho Investors. In elections on Aug. 30, the DPJ ousted the Liberal Democratic Party, which ruled Japan for all but 10 months since 1955.

The CHART OF THE DAY shows the widening gap between Japan’s expenditure and tax revenue, as well as the rising credit- default prices to protect investment in government. The fiscal gap increased to the widest on record at the end December. Japan’s public debt is more than 180 percent of its gross domestic product.

“In spite of all the efforts to boost the economy, revenue hasn’t increased since the bubble burst,” Ochiai said, referring to the collapse of Japan’s asset-inflated economy in the early 1990s. “Revenue growth is needed to contain and reduce the fiscal deficit. There’s even a chance that Japan could default.”

Investors are paying more for credit-default swaps to insure against non-payment on Japanese sovereign bonds over the next five years. The cost of protecting $10 million of Japanese bonds from default has risen $22,860 over the past year, to $39,360 yesterday, according to data compiled by Bloomberg.

Ten-year yields were unchanged at 1.305 percent yesterday. Japan’s outstanding debt totals 684 trillion yen ($7.4 trillion), according to the Ministry of Finance.

To contact the reporters on this story: Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net; Shigeki Nozawa in Tokyo at snozawa1@bloomberg.net.
Last Updated: September 3, 2009 19:26 EDT

 

America's future?

 

I'd say it's our present.

 

These articles are getting more interesting the damn second.....

Bulls should be reading and taking all of this in.