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Japan’s Fiscal Crisis Comes of Age

TOKYO – Has Japan’s political paralysis finally lifted? The recent agreement, after a long debate, between the government and leading opposition parties to double the consumption tax – from 5% to 8% in 2014, and then to 10% in 2015 – suggests that it has. But there is a real risk that the government will mistake this measure for the end of the reform process. In fact, it is – or should be – only the beginning.

By virtually any measure, official Japanese debt is the highest in the world. The total outstanding volume of Japanese Government Bonds (JGBs) is an almost unfathomable $9 trillion, only just below the $10.5 trillion in outstanding debt for the full 17-country eurozone, which has more than triple the population.