Global Debt to GDP Ratios Examined

Hello Pynksters,

Global debt seems to be spiralling out of control, a problem which the COVID-19 pandemic has done nothing to help.

But did you know? :thinking:

The country with the highest debt to GDP ratio is Japan. (237%)

The lowest is Brunei (with just over 2.6%)

Are you surprised to hear this about Japan? from outside appearances, one would not necessarily jump to this consideration of Japan.

Would anyone like to elaborate on the factors that, in your opinion, have lead to this massive debt in Japan?

Are there any surprises for you on the list of GDP to debt ratio by country? (See link)

Source: World Population Review

8 Likes

The vast majority of the $12 trillion in japanese bonds are held by japanese banks and individuals.

They have a lot of self-confidence I suppose, and being at the forefront of ageing populations in the world, probably consider good ol’ government-backed bonds a safe investment. Another factor is that yen is still a safe-heaven currency, and Japan is itself also the world’s largest creditor with $3.5 trillion in foreign assests, which doesn’t quite compensate, but must provide some further confidence to japanese investors.

Either way, Japan has a serious solvency issue going forward.

6 Likes

Mmmmm…I always thought that public debt of nations has to be resetted. There is no way any nation could ever pay back his debt…to me it is a complete no sense…

3 Likes

My country, Argentina, is a machine to generate debt, and unfortunately our currency is not in demand like the USD in the world, so unfortunately we have great inflation ahead.

2 Likes

Well some of the debts accrued by countries are for selfish reasons especially in my country. They are taken for projects which are never completed or costs are over priced. I think some kind of checks and balances should be introduced to curb debts worldwide.

1 Like

In the long-term, the Philippines Total Gross External Debt is projected to trend around 84265.00 USD Million in 2021 and 84565.00 USD Million in 2022, according to econometric models.

2 Likes

Japan is an unquestionably peculiar example. There are quite a few elements at stake when considering the debt pile Japan got itself into. Before we dive in, it’s important to point out that Japanese debt is considered a safe haven by investors, hence boasting a very low probability of debt default despite its massive debt load. This is reflected by the near-zero interest rate stamped on its debt securities such as bonds.

Judging by the information I pieced together from my readings, this is not the first time Japan sees monumental piles of debt. Actually, during WWII, Japanese debt reached roughly 260%. The post-war era saw currency devaluation and inflation take hold, therefore reducing national debt in real terms. Other issues such as the need to address various financial crises over the past 40 years determined Japan to bring liquidity into the economy by issuing bonds. This is arguably the reason for the massive debt increase.

What doesn’t help is the demographic timebomb the country is facing. Japan has one of the oldest populations in the world, which pushes healthcare and social security costs up, eating away the government’s annual budget. The work ethic there is fairly crazy too. The fact that they have a word for “death by work” says a lot. It is the same work ethic that drives people to mental health issues, indirectly inflicting suicide on the younger population. (Did I mention there are various sites in Japan know as places where suicides occur rather frequently?) Drifting away from the grim social situation Japan is facing, the country’s push for automation helps address the highly deflationary trend of the ageing population. Some of the most reputable robotics companies such as Fanuc, Yaskawa and Nidec are Japanese. Usually, clients include companies whose operations focus on manufacturing (particularly in the industrials sector). There are various interesting trends to examine in this area such as cobots, mechatronics, and the list goes on.

Zooming out from the microeconomic landscape, the advantage of Japan over other countries is that its debt is mainly (if not entirely) sourced internally and, hence, denominated in its national currency, the YEN. This means that its YEN-denominated debt doesn’t fluctuate as a result of currency exchange. To put this into perspective, Argentina has a meaningful amount of debt denominated in USD. Should the USD strengthen against the value of the Argentinian peso, the debt of Argentina would consequently increase in absolute terms, hence putting further pressure on its ability to meet its debt commitments.

When investing, your capital is at risk.

4 Likes
Disclaimer: By accessing the community forum you accept the Terms of Use in its entirety. Information, opinions and content posted or uploaded to the community does not constitute investment or financial advice given or endorsed by Pynk One Ltd and its affiliated companies. Information of this community is not intended to be relied upon for investment purposes. Investing carries a high degree of risk. Please make sure you invest aware, understand the risks of investing and seek independent advice if needed.
Terms & Conditions - Privacy & Cookies Policy
Copyright © 2021 Crowdsense Ltd.. All rights reserved.