RetireJapan

This is just a pointer to an interesting thread on japan's indebtedness over on JapanFinance.

It starts with a reuters article (alternate link to that at the bottom), with comments that follow.

It is very true that Japan as a whole is not overly indebted, as household and corporate balance sheets are in aggregate extremely healthy.

The trouble is the Japanese Government is very indebted, and everyone knows it. It’s one thing reason I keep most of my funds outside Japan. Long term, that wealth is going to have to be transferred from corporates and households to the Government in order to keep it functioning.

I prefer to be as minimally involved in that process as I’m required to be.

Deep Blue wrote: ↑Thu Jan 09, 2025 2:46 pm It is very true that Japan as a whole is not overly indebted, as household and corporate balance sheets are in aggregate extremely healthy.

The trouble is the Japanese Government is very indebted, and everyone knows it. It’s one thing reason I keep most of my funds outside Japan. Long term, that wealth is going to have to be transferred from corporates and households to the Government in order to keep it functioning.

I prefer to be as minimally involved in that process as I’m required to be.

I thought the "net debt" part of the net debt-to-GDP ratio was based on government debt and assets. Is that incorrect? According to the article, Japan’s ratio is about the same as that of the US, which isn’t good of course, but it’s not worse.

I think Japan’s net debt/GDP is about 160% and the US is around 100%

Will check later. As I remember Japan then Italy are the stand out counties with with high net debt to GDP.

Even if the numbers were the same, US has higher growth rates and better demographics.

Deep Blue wrote: ↑Sun Jan 12, 2025 1:41 am I think Japan’s net debt/GDP is about 160% and the US is around 100%

Will check later. As I remember Japan then Italy are the stand out counties with with high net debt to GDP.

Even if the numbers were the same, US has higher growth rates and better demographics.

They are both 119%. It was in the article. That was one of the things that struck me.
The U.S. annual deficit as a percentage of gdp is growing faster too, I think. But, yes the U.S. has far more growth potential than Japan and that’s why I assume the dollar will not depreciate against the yen over the long run.

ToushiTime wrote: ↑Sun Jan 12, 2025 5:58 am

Deep Blue wrote: ↑Sun Jan 12, 2025 1:41 am I think Japan’s net debt/GDP is about 160% and the US is around 100%

Will check later. As I remember Japan then Italy are the stand out counties with with high net debt to GDP.

Even if the numbers were the same, US has higher growth rates and better demographics.

They are both 119%. It was in the article. That was one of the things that struck me.
The U.S. annual deficit as a percentage of gdp is growing faster too, I think. But, yes the U.S. has far more growth potential than Japan and that’s why I assume the dollar will not depreciate against the yen over the long run.

I would check your sources. It is true the US has been on a massive fiscal splurge under Biden and their current fiscal deficit is worse than Japan - they have been building out a lot of infrastructure and paying massive subsidies to facilitate that. It will be interesting to see how much Trump pares this back, my guess is not much at all.

However, Japans overall net debt levels is far higher.

Using IMF data, there is a nice map here that visualises net debt/GDP

https://www.imf.org/external/datamapper ... T@FM/ADVEC

Japan 153.93
US 101.69
italy 128.69

Pretty much as I remembered.

This is an interesting thread. I wish I understood it! The gist seems to be that wealth is going to have to be transferred from companies and households to the Japanese government sometime in the future. How exactly? Are we talking about increased taxation and/or decreased pensions? If so, then how does "keeping funds outside of Japan" and "not being too exposed" work? You will pay the increased taxes either way (if you are tax-resident in Japan).

Or is it more of an exchange rate gamble, i.e. the yen will collapse so badly that overseas funds can then be repatriated at a great rate?

Or more of a "complete collapse of the Japanese banking system" scenario where you will lose most of your Japanese money?

I suppose no one knows at this point. Surely sending/keeping most of your money abroad "just in case" seems overly cautious?

I don’t think it’s overly cautious. I will realize my capital gains when I am not Japan tax resident. I will leave Japan for a few months after my employment ceases and restructure everything then.

Until then, my assets will happily grow overseas and not attract any taxation here.

I’m not taking any big currency view with this. Vast majority of my assets are in broad equity market index trackers so no different economic exposure than doing a similar thing here.

Thanks for clarifying. So you mean you will become temporarily tax-resident in a country that has zero CGT and then realise your profits? Is this easy and practical? If so, I wonder why more people don't do it?

Also, the funds you invest in don't pay any interest or dividends? If they do then you will have to pay tax on them annually until you cash them out, no?

Yes, that’s my plan. I have PR in Hong Kong which has no CGT, so I will realize my capital gains there.

And yes, I only invest in funds that don’t pay dividends. So no income, just capital growth. And crucially, I won’t accept PR in Japan so won’t be subject to the exit tax here.