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From Sagar Chakraverty, Opalesque Asia:
In the land of the rising sun, now debts are rising faster. Japan’s debt has assumed a humongous size, 1000tln yen ($11.25tln), which is more than twice its GDP ($5.1tln, 2009).
“As Japan has already reached a debt level of 200% of GDP, this has caused a downgrading of Japanese Government Bonds (JGB) by some of the rating agencies,” Masahiro Koshiba, chief executive of United Managers Japan, the first hedge fund incubation platform in the country, said in a recent Opalesque roundtable held in Tokyo in Feb-2010 (report here).
S&P lowered its outlook on Japan's debt from stable to negative in Jan-2010. Currently, Japan's debt is AA rated.
Japanese banks use excess savings to hold government bonds
Masahiro Koshiba said: “One of the problems of the Japanese financial systems is that there are too many savings.”
The banks have excess reserves, restricted by the capital requirement and they cannot take so much risk (in relation to their capital). Their investment universe is confined to Japanese Government Bonds (JGBs), and so there is no need for Japan to rely on foreign investors, which allows it to keep a low interest rate.
But Koshiba predicts that probably by 2020 the debt level will meet household financial assets le...................... To view our full article Click here
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