英语文摘：Japan burdened by huge debt, needs tax hike and belt-tightening

Japan had a similar experience in the 1990s, the country's so-called "lost decade." At that time, Japan's budget deficit soared after the country's property bubble burst, causing economic stagnation. But JGBs are mostly purchased by domestic organizations and households.

In other words, the private sector's huge savings financed the government's deficit, so that capital flight never occurred in the way it has in Greece, despite the desperate budget situation. But this situation has deteriorated recently, for two reasons.

First, the total volume of JGBs has become extremely high relative to households' net monetary assets. But in mere three years, total JGBs will exceed this total. This suggests that taxpayer assets will no longer back government debt, at which point confidence in the JGB market is likely to shatter.

Second, Japanese society is aging fast. As a result, the country's household savings rate will decrease dramatically, making it increasingly difficult for the private sector to finance budget deficits.

Moreover, an aging population implies further pressure on fiscal expenditure, owing to higher pension and health-care costs, with all of Japan's baby boomers set to reach age 65 in about five years.

Given these factors, the JGB market, which has been stable so far, will face serious trouble in the years ahead.

Tax hikes may help. But tax hikes alone with not close Japan's fiscal black hole. What is most needed is consistent and stable macroeconomic management. Such management is possible.