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Endgame: The End of the Debt SuperCycle and How It Changes Everything by Jonathan Tepper, John Mauldin

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CHAPTER TWELVE

Japan

A Bug in Search of a Windshield

Jitters in Europe stemming from the financial collapse of Greece are no longer somebody else’s problem. If Japan fails to tackle fiscal reform, we could come under the control of bodies like the International Monetary Fund, which could tell us what to do in the sovereign matter of fiscal management.

—Prime Minister Naoto Kan, June 17, 2010

Japan is a country that has spent the past 20 years in a hangover from one of the greatest bubbles of the modern era. After the great Japanese equity and land bubble burst in 1990, a long, painful process of deflation and deleveraging started. Even today, the country is still trying to rid itself of deflation. Japan is particularly important because it is the poster boy for the deflationary disease that the Fed is trying to fight.

In this chapter, we’ll look at Japan, a country that has all the conditions for a major upheaval. We’ll look at how the country’s public debt has exploded and how revenues have collapsed over the past two decades. We’ll also look at how quickly the population is aging and what lessons that might have for the United States and Western countries with quickly aging populations. The picture is grim to say the least, but we’ll plunge right in.

I (John) have often written that Japan is a bug in search of a windshield. That may sound harsh, but as you’ll see in this chapter, I’m probably being too kind.

The Mother of All Bubbles

In all of world history, the Japanese bubble ...

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