IMF concerned about Japanese debt
The IMF has today issued a statement regarding the Japanese economy and the ever-growing government debt. Japanese public debt now stands at 218% of GDP and there are serious concerns that it could rise to 250% of GDP by 2030 unless there is a major change in fiscal policy. So what can the Japanese authorities do?
The main tool which the Japanese authorities have at their disposal is an increase in consumption tax which would raise significant funding and bring down the ever-growing debt mountain. In many ways the Japanese authorities are paying the price for a number of ambitious and expensive fiscal policies which effectively rescued the Japanese economy in years gone by. When you consider the position with regards to UK GDP and national debt (around 70% at the end of 2009) then a figure of 250% of GDP is unthinkable.
However, historically the Japanese authorities have taken little notice of other governments and associations such as the IMF. The country has strong trading relationships with a number of worldwide counterparts and there has always been a belief that the economy will be able to trade its way out of any problems. Whether the authorities can "trade their way out" of this particular situation is debatable because if the worldwide economy was to downturn then the situation would become even worse.
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