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Japan’s Debt Monetization.

In Debt on March 26, 2011 by CQCA

As of January, 2011, the government of Japan owed ¥923.606 trillion. Japan’s GDP in 2010 was ¥477.3 trillion, meaning Japan has a debt to GDP ratio of 193.5%, the highest in the world.

Japan simply cannot repay this by cutting spending or raising taxes. Japan will have to default, or expand the money supply, with the second being a much more likely scenario.

The M3 figure for the Yen in January, 2011 stood at ¥1,085.3 trillion. Assuming Japan inflates its money supply to pay its debts, it would have to increase its money supply by 85%.

This would mark the end of one of the most stable currencies in the world.

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