“Abenomics”, the creation of Prime Minister Shinzo
Abe, is already having an effect and has had investors cheering as renewed
government spending and radical monetary easing aimed at ending 15 years of
deflation in Japan, were initiated. The yen has devalued sharply and stocks are
riding high, with the IMF sanctioning it amid Japan just avoided being accused
of currency manipulation. But analysts at Mizuho Financial Global warn that it would be prudent for Japan to address its
rising debt levels with comparable vigour by cutting welfare benefits and raising
taxes in the medium term.
The problem is that the situation in Japan is so severe its gross public debt is projected to reach 230 per cent of GDP by 2014. The OECD gave its approval to Abenomics in a recent report but advised Japan to do far more in arresting increasing debt, saying that a reversal in the rise in the debt-to-GDP ratio is crucial. The same applies to the IMF, that want to see Japan prepare more ambitious plans to tackle the debt crisis that also include structural reforms to shift the economy into “higher gear”.
For years Japan’s low interest rates has allowed it to issue debt and not be inundated with servicing payments and the Japanese people, who are known for their propensity for savings, were content to buy government bonds. In stark contrast to countries such as Greece, nearly all debt in Japan is held domestically. However, risks persist, particularly if interest rates rise, which would add to Japan’s fiscal quandary, thus damaging the economy and the institutions holding government bonds.
Japanese policymakers, especially Finance Minister Taro Aso, have talked of risk mitigation, saying the government are well aware of the issue and that they are paying attention to it. But, even if interest rates remain low, Japan still needs to attend to long-term structural problems to rearrange the economy into a more supportable position. Analysts at Mizuho Financial Global, given the unparalleled extent of its debt ratio and the threat of higher interest rates, say that Japan needs a dependable medium-term plan to include spending cuts, tax increases and enhancements to its fiscal policy framework.
About Mizuho Financial Global:
Mizuho Financial Global is an independent, full-service brokerage, wealth management and business management concern dedicated to providing pioneering capital appreciation and wealth preservation solutions to affluent individuals and families and businesses.
Without exception, they place the welfare of their clients first and foremost and they take great pride in knowing that they are the first port of call for their investment and financial affairs. They constantly exceed our clients’ expectations by going the extra mile to deliver the service and, most importantly, the returns on investment their patronage demands.
Contact:
Address: SHINAGAWA CRYSTAL SQUARE BLDG. Suite No. 901,
1-6-41, Kounan, Minato-ku,
Tokyo, 108-0075
JAPAN
The problem is that the situation in Japan is so severe its gross public debt is projected to reach 230 per cent of GDP by 2014. The OECD gave its approval to Abenomics in a recent report but advised Japan to do far more in arresting increasing debt, saying that a reversal in the rise in the debt-to-GDP ratio is crucial. The same applies to the IMF, that want to see Japan prepare more ambitious plans to tackle the debt crisis that also include structural reforms to shift the economy into “higher gear”.
For years Japan’s low interest rates has allowed it to issue debt and not be inundated with servicing payments and the Japanese people, who are known for their propensity for savings, were content to buy government bonds. In stark contrast to countries such as Greece, nearly all debt in Japan is held domestically. However, risks persist, particularly if interest rates rise, which would add to Japan’s fiscal quandary, thus damaging the economy and the institutions holding government bonds.
Japanese policymakers, especially Finance Minister Taro Aso, have talked of risk mitigation, saying the government are well aware of the issue and that they are paying attention to it. But, even if interest rates remain low, Japan still needs to attend to long-term structural problems to rearrange the economy into a more supportable position. Analysts at Mizuho Financial Global, given the unparalleled extent of its debt ratio and the threat of higher interest rates, say that Japan needs a dependable medium-term plan to include spending cuts, tax increases and enhancements to its fiscal policy framework.
About Mizuho Financial Global:
Mizuho Financial Global is an independent, full-service brokerage, wealth management and business management concern dedicated to providing pioneering capital appreciation and wealth preservation solutions to affluent individuals and families and businesses.
Without exception, they place the welfare of their clients first and foremost and they take great pride in knowing that they are the first port of call for their investment and financial affairs. They constantly exceed our clients’ expectations by going the extra mile to deliver the service and, most importantly, the returns on investment their patronage demands.
Contact:
Address: SHINAGAWA CRYSTAL SQUARE BLDG. Suite No. 901,
1-6-41, Kounan, Minato-ku,
Tokyo, 108-0075
JAPAN
Telephone:
+81-3-5782-8708
Facsimile: +81-3-5782-8707
http://www.mizuhoglobal.com
info@mizuhoglobal.com
Facsimile: +81-3-5782-8707
http://www.mizuhoglobal.com
info@mizuhoglobal.com
