Impact of Japan's Recent Debt on the World Economy (Essay Sample)

Impact of Japan’s Recent Debt on the World Economy
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Introduction
It is no doubt that Japan has remained one of the global economic bedrocks over the past decades. However, recent reports have indicated that the country’s debt crisis is very huge. This is being compared with what has happened in Greece. For the last two decades, Japan’s economy has been in a downturn. Policymakers in the country have tried to change the situation but things are not getting any better (Kang 63). The slow-motion economic growth has become a crisis with all reforms failing to meet the required targets. Current borrowing is projected to exceed the country tax revenues. According to experts, this budget deficit is projected to continue for the next coming years. Having been a great economy, the current debt crisis will definitely impact on the world economy. In this paper we will explore the projected of Japan’s recent debt crisis on the global economy.
Impact of Japan’s Recent Debt on the World Economy
For very many years, Japan has remained a very big economy with investors from different parts of the world looking for investment opportunities in the country. The current situation is therefore expected to greatly affect the global economy in a number of ways. The nature of the country’s situation is rather peculiar (Schaede 31). Essentially, it is agreeable that the country’s economy is currently suffering a very slow economic growth. This has seen the
government opting for new options such as credit acquisition thus plugging the nation into extreme debt.
The other nature of debt in the country is whereby the greatest majority of the aging population in the country is relying on debt. The economy has as well been faced by increased deflation rates and stagnation. In that situation, it becomes very difficult to situation, it has become extremely very hard for the country to sustain its economy without have to depend on foreign debts (Schaede 29). With the GDP hovering around 2 per cent for over thirty years, the growth rate forces the country to spend through accumulation of debts. This has become greater and greater until it has currently become a very big crisis.
To begin with, due to the debt crisis, the country’s insurance companies are currently disposing their assets overseas. This has thereby affected the global finance trade options thus bringing new orientations in terms of global economic foundations. Most of the industrialized nations have been affecting thereby being forced to look for new target markets. Due to this situation, new shifts are being noted in trade operations whereby the country is involved. Japan, for instance, is a major producer and exporter of vehicles (Kang 172). Current debt has greatly affected the industry therefore disorientating the business. A number of nations have been relying on Japan for bilateral and multilateral trading. The continued shifts and debt crisis have consistently been affecting the global economy.
Any economic powerhouse dictates a great deal of economic development in the global arena. When there is shift or economic debt, all the nations relying on the powerhouse will greatly be affected. This will bring new patterns in the economic structures. After the current tsunami and earthquake that took place in the country, it was revealed that the country had been suffering debt crisis for the past two decades (Schaede 32). Due to anticipated uncertainties, chances a very high that different trading blocs will be formed there bringing new changes in the global economic structures. Global economies very easily bounce back when physical destruction takes place. The reconstruction process will suck a lot of resources and also impact negatively on the economy. That being the case, many countries have been affected economically. Most of the countries such as United States, Latin America and majority of the third world nations relied on Japan for trade and foreign exchange. These countries will be affected and their economies will progress slowly by slowly. Slowed economic growth will be recorded thereby making it impossible to achieve sustainability.
In the next years, the Japanese government is planning to execute something known as ‘quantitative easing.’ This is a new approach to increase monetary supplies while at the same time keeping the interest rates as low as possible (Mikitani 61). This easing process will therefore strongly impact on other nations and investors who depend on the country’s currency. This new approach will only promote the country’s economic growth by stimulating borrowing in order to result in its revival. The countries that have always depended on Japan for economic development and trade have therefore been adversely affected by the current situation.
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