Japan 's Financial Environment : Japan

1720 Words Sep 16th, 2015 7 Pages
Financial Environment

When it comes to Japan’s financial environment one of the first things to note is the vast pile of debt that Japan has accumulated over the years. Japan’s gross debt-to-GDP ratio stands above 240 percent, which is the highest of all OECD countries (The Economist, 2014). In contrast, in 2010 the ratio was ‘only’ 178.4 percent. The reason for this huge debt pile is that Japan has had twenty-two consecutive budget deficits (OECD, 2015). And in recent years these deficits were often over 8 percent of GDP. The main reasons for the rising budget deficits are that government revenues have been stable as a percentage of GDP, whereas government expenditures have increased steadily (The Economist, 2014). For now, the burden the debt due to interest payments is limited due to the low interest rates at which Japan is able to borrow. However, an ageing population will make repaying debt in the future ever harder (OECD, 2015).
The Nikkei 225 Stock Average is Japan’s most important stock index. The Nikkei 225 index declined as a result of the Global Financial crisis and hit a low in February 2009. It was only after Abe took office as prime minister and announced ‘Abenomics’ that send the Nikkei index up with 57 percent during 2013 (Pattekar, 2015). In 2014 the Nikkei increased with another 5.7 percent and in June 2015 the Nikkei reached a 15-year high. However, due to economic growth concerns in China, and the effect of that on exports of Japanese companies caused…

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