How is abenomics working out? It doesn’t seem to be boding well for the government of Japan, the Japanese central bank or consumers. The country’s finance ministry released data showing the tremendous debt burden that it is experiencing: one quadrillion yen, specifically 1,008,628,100,000,000 yen.
In United States dollars, this is $10.5 trillion, still far short of Washington’s national debt of $17 trillion.
The one quadrillion yen figure is proving to be problematic for the Asian economic powerhouse. Right now, it is suffering from more debt as a percentage of GDP than any other developed nation in the world. With 830 trillion yen in government bonds and a paucity of revenues, it is projected that gross public debt will hit 230 percent of GDP sometime next year.
The Organization for Economic Cooperation and Development (OECD) has warned Tokyo that it must address its rising debt. However, that message hasn’t gotten through because it has increased its borrowing levels this year in order to pay for its economic stimulus program’s infrastructure initiatives and an attempt to end decades of falling prices and stagnation.
It has been reported that Japan is attempting to generate more revenues by doubling its consumption tax to 10 percent within the next two years – it will jump in two states: increase to eight percent in April of 2014. There has been growing doubt, however, as to whether or not even institute the tax increase.
Prime Minister Shinzo Abe and Bank of Japan head Haruhiko Kuroda announced its ambitious endeavor to have the economy roar again: double its present stimulus to 7.5 trillion yen ($81 billion), purchase Japanese government bonds with maturities of up to 40 years (a move to push BoJ bond holdings from three to seven years) and increase its acquisitions of financial instruments connected to stock and property markets.
Those who are staunch critics of Keynesian economics, which what this plan is, say price inflation will experience jumps, the money supply will grow astronomically and a crash in the stock market will transpire.