This piece is a somewhat lighthearted attempt at throwing light on a serious issue; Japan’s enormous government debt.
On the 9th of August 2013, the Ministry of Finance announced that Japan’s public sector debt exceeded one quadrillion Yen on June 30th. The debt stood at 1,0086 quadrillion Yen to be precise (or 10.46 trillion USD), which is more than the economies of the UK, Germany and France combined.
So how much is a quadrillion exactly? Well, one quadrillion is equal to one thousand trillion, which in turn is equal to one thousand billion, which in turn is equal to one thousand million. Below we present the numbers using zeros:
So one quadrillion is equal to one million billion. Confused? These number can be tricky to get one’s head around, so allow us to attempt to illustrate:
The US government’s on-balance sheet debt is around 16 trillion USD (around 60% higher than that of Japan), but this is for an economy that is almost 3 times bigger than the Japanese economy.
Worked out on a per capita basis, the average man, woman and child in Japan is theoretically significantly more indebted (through their government) than their US counterparts. The average citizen in the US is indebted to the tune of around $50.000 due to government debt, whereas the average citizen in Japan ‘owes’ around $80.000.
This of course is in addition to any personal debt each individual may have built up.
The Bank of Japan helpfully has a picture on its website of a package containing 100 million Yen in 10.000 Yen notes. The package is 38cm by 32cm, about 10cm thick and it weighs about 10 kilograms.
You would need to acquire 10 million of these packages to end up with a quadrillion. Stacked on top of each other, your quadrillion Yen ‘tower’ would reach a dizzying 1.000km into space and weigh in at 100.000 tons, or about the same as a herd of 14.000 African elephants.
Imagine a man standing in the middle of Tokyo handing out 1.000 Yen notes to people for 8 hours a day, every day of the week.
Assuming he hands someone a 1.000 Yen note every 5 seconds, it would take him 475.000 years to hand out one quadrillion Yen, or roughly the amount of time that has passed since the earliest Neanderthals roamed Europe:
What we have done here is to attempt to provide our readers with a grasp of the scale of the numbers involved in this ultimately very serious issue.
The debt burden in Japan is clearly enormous, and very obviously needs to be dealt with. The central government is already spending a quarter of its tax revenue just on paying the interest on its debt, and this is with very low interest rates. NipponMarketBlog has done the math on what will happen if and when interest rates start to rise, and it is truly frightening (see our piece here).
Shinzo Abe’s cabinet along with the BoJ’s Kuroda are attempting to turn the corner with its Abenomics program (see our piece here), but the challenge is very significant, and the jury is still very much out as to whether the attempt will prove successful in the long term.
On August 8th Prime Minister Abe ordered the creation of a panel of so-called experts to ‘analyze the impact on the economy of a higher consumption tax’, which is widely seen as the first step to help reduce the deficit which is currently running at around 10% of GDP.
However, NipponMarketBlog finds it interesting that two of the members of the panel will be Bank of Japan governor Kuroda and Finance Minister Aso, both of whom have obviously already expressed their support for the consumption tax being raised (See our piece here). One suspect that this panel of experts is being put together simply to rubber-stamp the government’s plan to raise the consumption tax, thus providing perceived expert backing for government policy in the eyes of the electorate.