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Japan’s debt is twice the size of its economy-but economists warn U.S.’s $40 trillion sum is worse
Fortune • • business
Key Points:
- The U.S. holds the largest national debt globally at over $40 trillion, but its debt-to-GDP ratio of about 126% ranks it outside the top 10 countries with the highest relative debt levels.
- Economists warn that despite a lower debt-to-GDP ratio than countries like Japan (207%) and Singapore (172%), the U.S. faces significant risks due to its rapid debt accumulation of $7 billion per day, limiting its fiscal flexibility during recessions.
- Japan's high debt ratio is less alarming because about 90% of its debt is domestically held, supported by high household savings, which reduces vulnerability to foreign investor sell-offs, unlike the U.S., which is the world's largest debtor nation.
- Rising inflation and interest rates are increasing Japan’s debt servicing costs, challenging the notion that advanced economies can sustain growing debt without consequences.
- Some economists question the usefulness of the debt-to-GDP ratio as an economic health indicator, arguing it oversimplifies complex financial realities and may overstate the risks of high national debt.
