IMF: $60bn offer from Japan

17th April 2012

Sometimes the news we receive is hard to believe and at other times it goes further and becomes like an episode from the science-fiction series the Outer Limits. Today it is the latter which has come to the forefront as Japan's Finance Minister has announced that she will provide some US $60 billion of loans to the International Monetary Fund. The Managing Director of the IMF is very pleased with this development although she has this year told us that her organisation needs US $600 billion or US $500 billion and more recently US $400 billion so we should not put too much emphasis on her. Indeed her lower estimate coincided with the crisis in the Euro building again!

Er doesn't Japan have an enormous national debt?

It seems appropriate to use IMF analysis to look at Japan's situation and from November here is its view.

"Public debt is on an unsustainable path, carrying risks to domestic and global stability."

Can anybody see a weakness in adding some US $60 billion to something that is on an "unsustainable path"? According to the IMF the gross national debt of Japan is around 225% of her economic output as measured by her GDP (Gross Domestic Product). And the outlook is for this to get even worse as Japan continues to run high fiscal deficits.

"Fiscal imbalances are projected to remain large going forward"

Indeed with the reconstruction efforts after the Fukushima nuclear problem and the tsunami the IMF expects Japan's net national debt to surge too.

"Following the global financial crisis and

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