New PM Kan was out saying “We cannot sustain public finance that overly relies on issuing bonds … As we can see in the Euro-zone confusion that started from Greece, there is a risk of default if the growing public debt is neglected and if trust is lost in the bond market.”
This is a change in policy for the G10 country with the highest debt to GDP ratio at over 200%. The demographics are working against Japan as the population ages. The savings rate has declined with the change in population which make sit harder to fund the deficit. The savings rate has been declining since the the early 1980's form well over 15% to no only 3.3%. This up form the low of 1.7% last year.
There are problems with mechanics if the deficit is to be cut. Monetary policy will have to b used to purchase debt. Quantitative easing will have to be used because it will be be hard to close the deficit gap through conventional means.
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