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Japan: Macroeconomic Recovery Accompanied by High Public Debt

Report of August 8, 2012

Following the natural and nuclear disaster, the Japanese economy is showing clear signs of recovery with GDP rising strongly again. Public spending programs bolstering domestic demand made a significant contribution to this development. However, this has led to an increase in public debt, which is currently over 230 percent of GDP and predicted to rise further. For some decades now, tax revenues have not been sufficient to cover expenditure. However, Japan is not facing the typical manifestations of a debt crisis. Public debt levels, which are very high by international standards, may have resulted in another downgrading by the Fitch Ratings Agency in May; however, interest rates remain low. This is partly due to the fact that new regulations have curtailed the market power of US credit rating agencies.

The complete publication in German by Mechthild Schrooten in: DIW Wochenbericht 32/2012 (PDF, 114.34 KB)