Japan’s debt as a percentage of its GDP was a humongous 208% in 2011—the worst inthe world, according to the International Monetary Fund. Greece, with its financial crisis,is comparatively better at 161%, and the U.S., with its crippling debt levels, is relativelystrong at 103% in 2011. (Source: “List of Countries by Public Debt,” Wikipedia via
, United States Central Intelligence Agency, last accessed January 14,2013.)The problem is that the newly elected Liberal Democratic Party appears to want to spendthe country into a financial abyss in order to pump up the country’s GDP growth.Japan continues to be in an economic abyss, void of any GDP growth.The expected use of expansive fiscal and monetary policy in Japan to try to re-ignite whatused to be the “Pearl of the Orient,” so far, has probably helped to prevent a deeper recession, rather than driving GDP growth.The country’s interest rates are already at zero, so there’s little space to maneuver. Giveninterest rates have been at zero percent since 2010, the failure of the country’s GDPgrowth to rebound is puzzling. Consider that the high point for interest rates since 2005was a rate of just over 0.5% in 2007. (Source: “What is the Japanese yen [JPY]?,”GoCurrency, October 22, 2102, last accessed January 14, 2013.) That’s seven years withextremely low interest rates, and not much has improved with the country and its GDPgrowth.The Markit/JMMA Japan Manufacturing Purchasing Managers’ Index (PMI) came in at adismal 44-month low of 45.0 in December. It was the seventh straight month of contraction.If I were a betting man, I would not bet my money on a turnaround coming soon for Japan.Japan is blaming the stagnant GDP growth on the stalling in Europe, the high level of theyen, and its impact on exports. The higher value of the yen does make it tough for Japanese exporters, and it is preventing an export-led recovery for the Japanese economy.And just like the U.S., Japan’s GDP growth is driven by domestic private consumptionthat accounts for about 60% of the economy, versus about two-thirds for the U.S.The problem is that consumer spending is down, as the country’s unemployment ratehovers over four percent. In 1980 and 1990, a mere two percent were unemployed,according to GoCurrency.