I spent an hour googling for statistics on total debt in Japan. Found two potentially useful sites: The Statistics Bureau, and The Bank of Japan. But no useful information until I got to Thought Offerings: The Mystery of Japan's Private Debt Levels (Solved?)
Right off the bat, Thought Offerings' host hbl offers a graph showing "Japan's Total Debt Levels by Sector (1980-2007)". Total debt, plus a breakdown into broad categories. Of this chart, hbl writes:
The above chart shows the total debt in yen for Japan's household, corporate, financial, and government sectors from 1980 to 2007 (the latest available). Private sector debt actually kept rising (much more slowly) after 1990, peaking around 1997! Government debt also rose significantly during this time period.
Two remarks on that excerpt. First, hbl breaks debt down the way I do: private sector debt and government debt. (And the highlighting is hbl's, not mine.)
Second, Japan's economy got into trouble around 1990, but private sector debt continued to grow for almost a decade after that. If (as I think) private sector debt is the problem, then the problem continued to get worse for a decade after it became obvious. There is a lesson in this for U.S. policymakers: If we expand government debt in order to rescue the economy, we will continue to make the problem worse unless we take specific actions to reduce private-sector debt as part of the rescue plan.
As a follow-up to that second remark, hbl again:
... willingness to provide ongoing fiscal stimulus as Japan did ... makes the Japanese style stagnation and mild deflation relatively more likely in the US
More likely than a deep depression, hbl says. But surely, purposeful expansion of the government debt does not solve the problem. What we need instead is purposeful reduction of private debt. Because excessive private debt is the problem.
I hope you can see, in the above, my respect for the work hbl has done in the post. I find a lot of insight in the post, and a lot to agree with. Now I'm going to go the other way and point out what I see as the major flaw.
I do agree with this: "Of course, total debt-to-GDP is not the only macroeconomic determinant that matters..." But these are the "other factors" that hbl identifies:
- Substantially higher household debt (in the U.S.)
- The global context today, and
- Other differences in financial markets today
Hbl follows that analysis with this insight:
Many people summarize the options for removing excessive debt as inflate or default.
The options for removing excessive debt. That is what needs to be done. That must be the primary focus. Nothing else will solve the problem. hbl knows it, but has difficulty maintaining focus. hbl's concerns include household debt, and the global context, and financial markets. A piece of the problem, a result of the problem, and a vehicle delivering the problem.
But where is the focus on "removing excessive debt"?
And where is the "macro-economic determinant that matters"? Where is the analysis of the relation between private debt and government debt? Where is the debt-relative? Everyone focuses on government debt and if they ever compare it to anything, they compare it to GDP. Allow me to summarize the evidence hbl presents for Japan:
- The graph of total debt levels by sector
- A graph of Japan's GDP.
- A graph of the debt-to-GDP ratio by sector
- Another graph of public and private debt as a percent of GDP
- A comparison to U.S. debt-to-GDP by sector
- A bar graph of debt-to-GDP ratios
- A table of percentages related to the bar graph
Of those seven items, one shows debt, one shows GDP, and five show debt-to-GDP. And yet, as hbl says, debt-to-GDP is not the only macroeconomic determinant that matters. So where is the debt-relative?
hbl "breaks debt down the way I do: private sector debt and government debt." But hbl doesn't use his own breakdown. He doesn't compare the one to the other in his graphs. He doesn't show private debt relative to government debt.
I want to see some graphs comparing private debt to government debt in Japan. That is what's missing from hbl's post.
Where is the debt-relative?