Japan's national debt constitutes more than 260% of the country's Gross Domestic Product (GDP). Although this numerically makes Japan the most indebted country in the world, the country is not experiencing an economic crisis. So, what is the secret behind this?
Medianews.az, citing Milli.Az, reports that while the debt of many countries (for example, Greece) is owed to foreign banks and international organizations, approximately 90% of Japan's national debt is owed to its own citizens and local banks. In other words, Japan is "indebted to itself."
The Bank of Japan has kept interest rates close to zero, and sometimes even negative, for years. This significantly reduces the interest burden on the government's enormous debt.
Japan repays its debt in its own national currency, the Yen. When necessary, the government can issue more Yen, which reduces the country's risk of default to zero.
Japan is also one of the world's largest holders of foreign assets. In other words, its claims on other countries and foreign investments balance out its debt burden.
High technology, an orderly social system, and strong exports form the foundation of Japan’s economy. Because citizens trust the government, they continue to finance it through bonds. This "closed circuit" system protects the country from external speculation.