When will the Japanese bomb go off?

The Japanese default will be akin to an asteroid impact, from which dinosaurs died out in time immemorial, and the development of the Earth took a different path

Japan, or rather its currency, the yen, is turning into an island of stability, in the same sense that Russia was called a "safe haven" two years ago. Therefore, against the general nightmarish background, the Japanese are doing pretty well. And the yen is the only...

Japan, or rather its currency, the yen, is turning into an island of stability, in the same sense that Russia was called a "safe haven" two years ago. Therefore, against the general nightmarish background, the Japanese are doing pretty well. And the yen is the only one of the world's currencies that is confidently holding its positions against the dollar (traditional safe-haven currencies - the Swiss franc and the British pound - are in a fever).

It is all the more interesting and important to understand what the financial system of Japan is like, how it is suitable for the role of a saving straw.

This plot of land, not far from the moated complex of imperial palaces in the center of Tokyo, once housed the embassy of the Russian Empire. After the revolution, forgotten diplomats of a non-existent state went to work there for a long time, and then the Japanese handed over the building to the disposal of the permanent mission of the USSR. However, the focus of red infection in the center of the capital was an eyesore, and the Soviet embassy was eventually transferred to another place, to a much larger site.

Now, on the site of the former mission of the Romanov Empire, the economic bomb of global destructive power is ticking quietly and imperceptibly to the general public. The Ministry of Finance of Japan is located there, which for many decades covers the budget deficit of the second economic power on the planet after the United States by issuing government bonds in fantastic amounts.

It is no longer possible to return these amounts to creditors - if they suddenly demand their money back, the country will go bankrupt. And Japan's default is not the story of 1998 with Yeltsin's Russia or the current debt problems of the Greeks, from which the respectable European Union reeled this year.

Careless Hellas made people talk about the collapse of the euro zone and the second devastating wave of the global crisis, due to the fact that its debts per capita amounted to somewhere in the region of 30 thousand dollars. However, every Japanese, including newborn babies, now owes more than $70,000. And it's not just that. Japan is one of the key players in global industry and global finance, with tens of billions of dollars scrolling daily on the Tokyo Stock Exchange. The Japanese default will be akin to an asteroid impact, from which dinosaurs died out in ancient times, and the development of the Earth took a different path.

On May 17, the US Central Intelligence Agency published its latest World Economic Guide, which, among other interesting facts, reports that Zimbabwe ranks first in the world in terms of the ratio of public debt to gross domestic product. It owes more than 304% of its GDP to creditors. In third place in this sad indicator is the little-known tiny Caribbean state of Saint Kitts and Nevis - 185%.

And in the second position, in the gap between these, no doubt, venerable, but rather impoverished countries, was powerful Japan with all its Toyotas, Panasonics, prosperity and technological miracles. Its public debt at the end of 2009, according to the International Monetary Fund, amounted to 218.6% of GDP. In other words, in order to fully pay off our Far Eastern neighbors, we need to give away everything they have produced and earned in more than two years.

The amount of Japanese public debt in monetary terms is not easy to represent in terms of physical mass: at the end of March 2010, it was almost 883 trillion yen (about 10 trillion dollars at the current exchange rate). This is a billion standard bank ten-thousandth packs, which in action films about the drug mafia, during dubious transactions, show some bad characters to others, opening tightly stuffed suitcases. Someone calculated: if these packs are carefully placed one on top of the other, you will get a shaky tower 100 thousand kilometers high.

Knowledgeable people, of course, will say: the US has even more foreign debt. It is almost 14.5 trillion dollars. But there is an important detail: this is less than 85% of the US gross domestic product, which is not yet as monstrous as that of Washington's Pacific ally.

The financial bomb ticking in downtown Tokyo on the site of the former Russian embassy was born of political considerations and the understandable desire of democratic politicians to please voters. In Tokyo newspapers in early June, for example, photographs of children happily showing banknotes to reporters flashed with might and main. Starting this year, the Japanese government began to pay $140 per month for each child under 18. Next year, they are committed to increasing the amount in order to promote childbearing.

In addition to the previous and already solid social obligations, the Japanese government is now committed to making high school education virtually free of charge not only in public schools, but also in private schools. Economists clutch at their heads, referring to the dangerous populism of such measures, but what can not be done to win the elections! However, it's not just about the growing financial gifts to ordinary citizens - for decades, Japanese governments have directed huge funds to support small and medium-sized businesses (now they are promised to cut taxes by almost half), unprofitable peasant farms, construction companies pumping state yens into the construction of dams and concrete overpasses . All this keeps incomes, economic conditions, contentment and well-being of the population at a very decent level, but makes the national debt bomb all the more dangerous.

Despite constant talk of austerity, the country has put in place a budget this fiscal year with the largest expenditure in history, over $1 trillion. Nearly half of this amount will again be covered by government bonds, pumping up even more of Tokyo's already unthinkable debt.

There is no particular hope for an increase in revenues to the treasury, since, for example, Tokyo keeps the consumer tax (an approximate analogue of our VAT) at 5%. For reference: in Sweden its rate is 25%, in Britain - 17.5%, in Germany - 19%. Now both the government and the opposition are talking about increasing the consumption tax, but doing so is scary. History has already shown that governments in Japan are immediately defeated in the next elections as soon as they start talking about raising taxes. In addition, the population in Japan is catastrophically aging: the army of those who actively pay taxes is getting smaller. In short, there is no way out of the financial trap that this rich, prosperous and developed state has fallen into.

“The only reassurance is that our debt bomb, unlike Greece or, say, Spain or Portugal, which are next in line for bankruptcy, is unlikely to explode yet,” an expert at Tokyo-Mitsubishi-UFJ, the largest bank in the country, reassured me. — Japan is still saved by the colossal savings that its ordinary people have.

Indeed, the financial frivolity of the country's government so far is more than offset by the fantastic frugality of our Far Eastern neighbors. As well as the extreme reliability of their banks. From the first impoverished post-war years, the Japanese have become accustomed to saving on everything, saving every yen and living, as they say, tomorrow. They saved up for the education of children, for the payment of a mortgage. A simple Japanese very rarely keeps money at home, he takes it to a bank or a savings bank - because he trusts them.

Until recently, the country's government guaranteed the safety of all deposits in any development of the situation. In 2002, in the wake of the previous financial crisis, the first restriction was introduced: the authorities now ensure the safety of deposits up to $100,000. However, no one prevents rich people from making deposits in many private banks.

So, attention: banking deposits of individuals in Japan now amount to almost 9 trillion dollars. Together with investments in securities and the same government bonds, this amount reaches almost 16 trillion.

This almost unbelievable array of savings is in the hands of the financiers, is put into circulation and so far reassures the holders of the national public debt. It is also important that, unlike the United States, Japanese government bonds are almost entirely owned by patient ordinary citizens of the country, and not by nervous foreigners who, in case of hysteria, are ready to immediately begin demanding their money back.

By the way, the Japanese 9 trillion dollars look especially beautiful against the backdrop of the official announcement made in Moscow that the deposits of individuals in Russian banks as of May 1 this year only slightly exceeded 8 trillion rubles. The population of our countries is comparable - Japanese 127 million against 142 million in our country. What then is the reason for such a noticeable difference? The extreme poverty of Russian citizens, the habit of hiding money in a mattress or the export of capital abroad?

However, this is a separate issue. For now, it is clear that the Japanese buffer in the form of colossal private deposits will eventually cease to dampen the blows if Tokyo continues to build up its public debts at the same rate. The bomb at the imperial palace has not yet been defused and could explode on the entire planet.