Japanese Sovereign Debt

The graph is from this paper by Takeo Hoshi & Takatoshi Ito (Jan. 2014). A draft is here (Mar. 2013). 
The authors say that even-though the debt to GDP ratio in Japan is the highest in the world, interest rates have been low. What explains that? They say that a possible explanation is that a large portion of the debt is owned by Japanese who basically feel confortable with low yields. That however is unsustainable and corrective measures are necessary. 
The authors argue in the conclusions:

The Japanese government debt is clearly unsustainable without a drastic change in fiscal policy. The interest rates of Japanese government bonds, however, have been low. Market participants do not seem to worry about the problem of high and rising debts. The continuing low JGB yields may reflect the market’s view that the ample amount of private sector financial assets in Japan will always be there to absorb additional JGBs, but the current calm situation may not continue. The rapid aging of the Japanese population means that the growth of private sector savings is slowing down and eventually will turn negative. The Japanese government cannot rely on the private sector to continue buying JGBs beyond a certain point. (p. 19).  

Counterintuitive Finding-of-the-Day

Abstract: Hiroshima and Nagasaki in Japan are the only cities in the world that have experienced an atomic bomb attack. This paper explores how this devastating experience affected victims’ tendency to trust others. Individual-level data were used to examine the long-term influence of experiencing an atomic bomb on individuals’ trust. After controlling for individual characteristics, I obtained the following key findings. Individuals who experienced the attack were more likely to trust others. Furthermore, estimation based on a subsample revealed that victims of the Hiroshima nuclear bomb were more likely to trust others than those born in other areas of Japan before World War II. This implies that experiencing an historically traumatic event in 1945 strongly influenced individuals’ trust in others even at the beginning of the 21st century. It follows from this that the effect of this devastating experience was enduring and had a long-term influence on individuals’ values.

That is from a new published paper by Eiji Yamamura (The Journal of Socio-Economics, October 2013). See a draft here. The conclusions are particularly informative.  

Just started reading . . .

Grotesque by Natsuo Kirino. 

What I read today (03-25-13) . . .

The Housekeeper and the Professor: A Novel by Yoko Ogawa, and it was pure joy! 

Saving Rate in Japan

A reduction in the saving rate usually affects the amount of capital that a country accumulates, and as a consequence the amount of income per person. Recently the saving rate has decreased in developed countries. This might be due to a change in preference (individuals prefer to consume today rather than later, and this behavior is stronger now). 

A recent paper (Iwaisako and Okada, August 2012, a 2010 draft is here ) explores the reduction in the saving rate in Japan in the 2000s. The authors argue that this is due mainly to the reduction in income as a consequence of the financial crisis in Asia in the late 1990s, which has affected mainly older people. 

Saving rate in Japan:

Saving rate by age group:

Saving rate, age 60 and over:

Even though the saving rate of households has decreased, the saving rate of corporations has increased. The later is due to the legal restructuring that took place after the crisis.