The Strategy Session—on Friday June 11, 2010—showed a Japanese advertisement that was given to us by a source.
On Friday the new Prime Minister of Japan, Naoto Kan, warned that the country must control its national debt or risk defaulting .
Why the push to sell these bonds? According to our sources, Japan is out of money, currently spending twice what it makes.
The essential point is that Japan's working-age population peaked last year, and as a result the country has to pay out more than it takes in, due to a secular population decline.
In addition, rating agencies have turned up the heat by threatening to cut Japan’s sovereign debt rating unless the government devises a plan to cut its debt. Standard & Poor's already cut its outlook for Japan because it lacked a plan back in January.
Japan’s central government expenses will be 96 trillion yen, but they are spending twice this amount; the country’s debt service alone is 20.2 trillion yen (50 percent revenues) and its social security cash expenditures at 24 trillion yen.
The bottom line: it is plausible that the world’s second largest economy is about to enter a real bond crisis and soon the Greek tragedy may very well take a back seat.
- Bank of Japan details $33 Billion Loan Programme
- Can Sex Sell Sovereign Debt?
- Japan Refocuses on Debt Problems
- Japan's Ruling Party To Pledge To Balance Core Budget
*Correction: This post was updated and the advertisement image was changed on Tuesday, June 15.