Who will buy Japanese Government Bonds after 2016?

Japan cannot grow its national debt as a percentage of GDP indefinitely. At some point, if government deficit spending remains on its current path, the market will decide the debt cannot be repaid and will stop further buying. When and what might cause that to happen?

Former Goldman Sachs senior economist Takuji Okubo knows the future can never be foretold with absolute certainty. Still, he’s “pretty certain” that Japan will suffer a fiscal crisis – “2016 is a good candidate year,” he told me over lunch. That’s when he thinks Japan’s government will run out of buyers for its debt.

Okubo is the managing director and chief economist of Japan Macro Advisors Inc, a privately held Tokyo based boutique consultancy that provides industry and financial institutions with a source of independent advice on the direction of Japan’s economy. Neither he nor his firm stand to gain, I was personally assured, from a move in the markets caused by publication of this article.

As Okubo sees it, Japan will not be able to follow other advanced nations in the unwinding of asset purchases they have made by following unconventional monetary policies. Central banks of most developed countries have been buying large quantities of their own government securities with newly minted money to stimulate investment and growth. Japan is no exception.

Beacon Reports reveals Japan through the lens of thought leaders.