The Great Debate UK

Japanese fiscal management dragged into the spotlight


foley-Jane Foley is research director at The opinions expressed are her own.-

Perhaps the oddest side-effect of the  Greece debt crisis has been its ability to drag Japan’s budget into the spotlight.

There are so many differences between Greece and Japan that the question asked by at least one media report “is Greece the next Japan” sounds like a clumsy analogy.

For one thing Japan is not involved in a monetary union and has a flexible (and very liquid) currency.  That said, given that all governments will have to compete harder this year to place larger amounts of debt and since there are estimates that Japan’s gross public debt/GDP ratio could expand to beyond 200 percent this year and given S&P decision to lower the outlook on Japan’s sovereign credit rating to ‘negative’, it is easy to see why Japan’s budget is drawing attention.