Result if Japan’s trade balance switches to deficit

“Those who argue that Japan can simply keep eating its own debt indefinitely are right until and unless the economy can no longer run an external trade surplus.

Theoretically, as population ages, this point will be reached, since productivity will fall with rising workforce median age. So we know there is an outer limit somewhere, although we have no idea at this point where that limit is.

Once Japan has a trade deficit it will all be over pretty quickly, since then of course they will have to attract funds to finance the deficit, and this is where things will start to get pretty tricky.”

Edward Hugh


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