Japan’s Prime Minister Shinzo Abe has been under pressure from his finance ministry to introduce a spending cap to reduce the country’s massive debt burden. This is the first of a two-part series on Japan’s finances. It looks at why Mr Abe is refusing to agree to their demands when many economists say that while a near-term crisis is unlikely, a budget financed by a large percentage from debt is unsustainable.

JAPAN’s public finances are in dire straits. The country’s gross government debt is approaching 240 per cent of annual gross domestic product (GDP), more than double the levels of the United States or the eurozone, which are each at around 100 per cent.

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Dr. Stefan Lippert
Mr Abe, along with large parts of Japan’s political establishment, believes that fiscal austerity would undermine consumer sentiment
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