Outlook 2012: No way out of Japan’s debt problem
5:49 PM, E.T. | December 29, 2011
Japan has a debt problem. One bond expert tells BNN he doesn’t see any way out of it.
Levente Mady, managing director, derivatives, Union Securities tells BNN Japan holds a 450 percent total debt-to-GDP ratio, with the government’s debt-to-GDP ratio alone standing at almost 200 percent. And its interest rates have been near zero for about 20 years.
“If interest rates back up to closer to two percent, if they double to where interest rates are in Germany, and the States, Canada and other so-called safe haven countries, Japan would be spending 100 percent of its revenues on interest payments and on debt coverage,” he says.
Adding to the problem is that nation’s demographic shift, which Mady calls “the worst on the planet.” The population in Japan is aging, retiring and taking money out of the system and not enough new workers are entering the workforce to pay into the system, he says.
“I don’t know how they’re going to solve it. It’s just the case that there’s too much debt. And I don’t see any way out, frankly.”