Japan’s Debt, Bond Rates Rise

Japan’s debt burden in 2012 will rise to more than 200% of the country’s expected GDP, putting it above the ratio of debt to GDP of Greece, Italy, and the US. That’s not a big worry yet because Japan’s economy is the world’s third largest, and its ability to borrow at low rates, though rising, is still comparatively low.

But interest rates on credit default swaps on Japanese sovereign debt have risen to 1.55% from 1.1% in November. And the country is better positioned to weather a bigger storm of debt due to its high savings rate. For one thing, it controls its own currency and can fire up the printing press without having to mollify the Germans or the French, unlike Greece or Spain or Italy.

Still, Japan reported a trade deficit last week that could force the company to rely on foreign investors to buy its debt. The country’s bonds have so far been absorbed by domestic buyers.

Nothing critical here yet, but a situation worth watching going forward.