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Japan's Debt Trap
OFFICIAL LEVEL
PUBLIC About 100% of GDP,
DEBT or $4.5 trillion.
That's on a level with
such highly leveraged
Western countries as
Belgium, Canada, and
Italy.
NONPERFORMING About $600 billion. The
BANK LOANS government has recently
admitted to that much
after claiming for years
that it was only about
$200 billion.
CORPORATE Debt exceeds equity
LIABILITIES by an average of 4
to 1 in the corporate
sector. That level is
forcing companies into
bankruptcy at a record
rate.
PROPERTY Official Level. Japan's
PRICES commercial and household
real estate is still valued
at $17.5 trillion.
PROBABLE LEVEL
PUBLIC Actual public debt could be as
DEBT much as 250% of GDP, making
Japan the most indebted nation
in the industrialized world. To
reach that number, analysts throw
in the debt of Zaito, an off-bal-
ance-sheet government lender.
NONPERFORMING More like $770 billion, according
BANK LOANS to the ratings firms. The extra
$120 billion is bank declared
nonperforming but probably
not being serviced by distressed
corporate borrowers.
CORPORATE The situation is likely to be worse,
LIABILITIES since poor accounting does not reveal
borrowings overseas or pledges to
cover the debt of corporate affiliates.
Private pension plans totaling
$600 billion are underfunded by as
much as 40%.
PROPERTY A markdown of 10% to 30% is
PRICES probably necessary. That means
households with mortgages are sit-
ting on $250 billion in paper losses.
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Updated May 7, 1998 by bwwebmaster
Copyright 1998, Bloomberg L.P.
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