Japan’s Debt Problem

Download 2010-3-1 Japan Looks Hard at Trimming Huge Debt – WSJ.com

The nation's gross government debts soared to 229% of its GDP this year, compared with 92% for the U.S. and 118% for Italy, according to the International Monetary Fund.

Still, some experts say worries about Japan's debts are overblown.

"The chance of Japan defaulting on its debt is very small and a spike in long-term interest rates is a risk for a few years down the road," said Tomoya Masanao, a fund manager watching Japan at bond fund Pimco.

Also working in Japan's favor is the fact that nearly 95% of its outstanding government debt is held by domestic investors, a group who has few other investment options. In the U.S., foreigners hold roughly a quarter of the outstanding Treasury notes, making the market inherently more unstable.

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