The Heritage hit-piece on its nemesis (Keynesism) doesn’t have much, but I did see the writer not really understanding the true import of the fact that 95% of the colossal Japanese debt is internal.
What this really means is that both the debt and the vaunted Japanese “saving” has been equally fictional — the Japanese haven’t been saving, they’ve just been dodging paying taxes and calling it savings.
Clear as a bell!
If we don’t see Japan see to positive trade balance over the next couple of quarters things really start to unravel. And that wouldn’t be pretty. That said, my intuition is that the trade balance will, once again, recover, postponing the denouement for another few years.
The big question then becomes will it be possible to raise tax enough to start to offset the last couple of decades of living in denial? This whole ‘transition to low growth economics’ thing is certainly tricky…
Time, it seems, is always running out for Japan. Has been for the last decade, and looks to continue to do so for some time yet.