As not growing particularly fast. Many economiesAs not growing particularly fast. Many economies

As stated in the other posts, Japan has a very high debt to GDP partially because it has attempted to use fiscal stimulus (i.e. paving roads) to jump start its economy over the last two decades. In addition, up until this point most Japanese Government Bonds (about 90%) are held by citizens of Japan, and this has allowed it to take advantage of extremely low interest rates. Low interest rates mean that Japan does not have very high interest payments in relation to it’s level of debt. For now, then, Japan will not default like Greece whose debts are held by external creditors and who cannot print their own money to finance their debt because they are part of the Euro zone.The future of Japanese debt is murky. Japan faces very significant structural headwinds as it tries to keep it’s debt under control. The two factors which are likely to most significantly impact the Japanese ability to repay its debts in the future are it’s demographics and it’s economic growth. Japanese economic growth in an absolute sense has been fairly low for almost two decades now. This means that the GDP part of the debt to GDP ratio is not growing particularly fast. Many economies hope that they can grow their way out of their debt, but it’s unclear whether Japan can accomplish this.Perhaps even more serious is the Japanese demographic situation. The Japanese population peaked in 2010 and is now declining. In addition, an increasing proportion of its population is elderly. This, of course, means fewer working age people which means more difficulty growing GDP. More significantly, though, this also means that there are fewer people to finance Japan’s massive debt within the country. In particular, much of Japan’s debt is financed through Japanese citizens’ savings which are channeled through things like pension funds and life insurance. As a culture, Japan is extremely conservative and insular when it comes to money. This tendency means that significant amounts of savings are channeled into Japanese debt.As the Japanese populace ages, people are going to start withdrawing from these funds making it increasingly difficult to finance the debt within the country. At the same time, the savings rate for younger people in Japan is also falling indicating that the fewer younger people in Japan will also not be contributing as much per person to financing the Japanese debt as in the past. Instead, Japan will have to venture out into the broader world in order to roll over it’s massive debt. This is likely a gradual process, but it seems likely that at some point enough debt will be held by non-Japanese citizens that Japanese Government Bonds will become susceptible to interest rate fluctuations similar to many other countries. At that point, Japan may start having difficulties paying back it’s debts.Japan is currently embarking on a monetary program to try and jump-start it’s economy and combat it’s debt problem through growth. The Japanese central bank is essentially printing massive quantities of money and purchasing Japanese Government Bonds in a bid to increase inflation and spur growth. Currently, it has had a significant effect in lowering the value of the Japanese Yen on the international market. While this has helped large firms which primarily export, it has hurt small and medium sized firms by raising their costs. While it has lowered the value of the Yen, this program has not had as significant effect on inflation as desired. At the same time, Japan has failed to implement any type of fiscal discipline.