Japan is currently the nation with the highest debt as a percentage of GDP - at the time of writing it stands at over 250%. Greece, currently the second most indebted nation, went through a decade-long debt crisis after the 2008 financial crash. It entered this crisis with debt levels of 'only' 103% of GDP, and over the entire debt crisis, this only increased to 181% of GDP.

How is Japan able to withstand this level of debt without entering a debt crisis similar to Greece? Is this the right metric to look at, or are there other factors specific to either country?

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    Comments deleted. Please don't use comments to answer the question. If you would like to answer the question, please write a real answer.
    – Philipp
    Commented Mar 20, 2020 at 15:49
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    You should probably add that Greece was not on the drachma in 2007/8
    – Frank
    Commented Mar 20, 2020 at 16:07
  • @Frank I'm not sure how that changes the question; it could be part of an answer though?
    – CDJB
    Commented Mar 20, 2020 at 16:09
  • @CDJB yeah maybe you're right.
    – Frank
    Commented Mar 20, 2020 at 16:17
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    @Mark California has at times, fairly recently, struggled with excessive state debt and it wasn't pretty. Constant high-deficit spending is a fool's trap, much as Keynesian stimulus can be a very useful lever to get out of temporary economic crunches. At those indebtment levels, a good chunk of your tax revenue goes to interest payments, rather than staying in folks' pockets or being used for education or healthcare or whatever. And... when a new emergency comes you either dig yourself in some more, or you don't have any $ to act with. Commented Mar 21, 2020 at 15:50

5 Answers 5


Their economies are radically different otherwise.

  • Greece has a weak economy in most fields, with the exception of tourism. Japan is a manufacturing and scientific powerhouse.

  • Greece runs recurring high deficits and had rarely, if ever, shown inclination to stop doing so. While Japan was criticized at the start of their financial decline for insisting on balanced budgets instead of stimulating demand.

  • Tax collection. Japan does it. Greece didn't.

  • Japan could devaluate its currency if necessary to adjust its finances. Greece couldn't, being on the euro.

  • Japanese government debt is, I believe, mostly owed to Japanese investors and denominated in yen, unlike Greece's.

  • Japan has demonstrated for decades that it can pay its bills, on its own. Greece on the other hand just seemed as if the only thing that kept it up was euro membership.

  • Greek official statistics were not, and had not for a while, been trusted. They're still prosecuting the guy who showed they were cooking the books.

Until 2008, Greece was only getting charged a 0.25% point premium over German bonds based on the tacit assumption that Europe (Euro-zone) would never let Greece go broke. Investors, out of greed and risk un-awareness (or trust in European taxpayers gullibility), parked their money in Greek bonds, rather than German ones, just to get that extra 0.25% point.

From https://www.bankofgreece.gr/Publications/Annrep1999.pdf (I find it hard to set hard time limits on Google to only look at stuff from before a date):

Specifically, the yield differential between the Greek and the German 10-year bond fell from roughly 270 basis points at end-1998 to about 200 basis points in March 1999 (see Chart VI.1).

At the start of the general crisis, investors started wondering if trusting that Europe would always back Greek debt, even when undergoing a Europe-wide crisis, was a wise idea. Once perception soured, the game was up very quickly. Financing costs for Greek government debt went up, fast. Any refinancing happened at progressively higher rates. A debt that looked bad at the previous, lower, rate seemed like it would result in a short term default. People still loaned to Greece, but the premium to do so was massive and made this very quickly unsustainable.

The plug was pulled, late high-rate private and non-European investors got a haircut. Europe's taxpayers paid up enough money for Greece to keep paying slightly lowered interests, at deferred times, to the big German and French banks so they wouldn't take too massive a loss (and so that loss of confidence wouldn't spread, as per @Machavity answer).

Most Greek debt remained in place, unlike what happens in say an Argentinian default. In fact, money "helpfully" loaned to keep Greece from defaulting on interest payments just got added to the overall debt. In a way, though it fully deserved the initial mess it got, that's the tragedy of Greece. Instead of the reset that comes with a default, Greeks got this unending misery of servicing a debt which is only pretended to be fully recoverable from (as most of my post is critical, I want to stress that, IMHO, the Greek people don't deserve to live through this for decades).

But no one is too willing to put their hands in that wolf's jaws anymore.

As o.m. says, mostly perception. Until COVID-19 at least, Japan looks like it has a few good years left for investors, most of whom are Japanese and have little interest in rocking the boat. This is not to say it is financially healthy, only that it is under less external pressure.

Greece relies on foreign money, didn't look good in 2008 and doesn't now. In most other conditions, big chunks of that 181% would have been written off as unrecoverable already.

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    Tax collection is key. Also, a better measure than debt relative to GDP is interest payments relative to GDP and relative to government revenues.
    – ohwilleke
    Commented Mar 20, 2020 at 21:32
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    cool, to sume it up, debt-repayment ability. Greece can't make the repayments very well, its industry (services/tourism) crashed when the world got poor, it lost half its revenue. I am told that german banks are responsible for the unsustainable debts in the first place, reason for which merkel was so much involved. Commented Mar 21, 2020 at 5:36
  • @com.prehensible not sure if actual industry and income crash started this for Greece because it happened so quickly. I think, after screwing the bad mortgages fiasco in the US financiers were finally asked to do their job and assess risks correctly. Greece didn't look a good risk, so kaboom. While I understand why bank bailouts were needed (Machavaty's under-rated ans), I wish individuals from then-CEOs down to the individuals mis-pricing risks had had their trading licenses revoked and were flipping burgers, something they, possibly, might be capable of doing. Commented Mar 21, 2020 at 15:34
  • Germany may have had input because of how much German banks loaned - but everyone had their snout in the trough. Probably a good deal more was that, in 1992, the Bundesbank had insisted on criteria to join the Euro. Had they been respected, Greece would not have had to default. Germany didn't want to bail out and give a free pass to the Greeks for messing up. The Germans are just more prudent in public spending and the role of schoolmaster sure wasn't gonna be taken up by France, which hasn't balanced a budget in 40 years. Commented Mar 21, 2020 at 16:22
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    Italian is incorrect. Germany had an explicit policy of keeping domestic labour costs down while pushing their surpluses onto Southern Europe . When the free money taps got turned off the western media pointed at the PIIGS as lazy unproductive fools, in outright racist/nationalist condemnation, without informing anyone of the underlying truth. It took too long for Germany to sacrifice. Info google.com/url?sa=t&source=web&rct=j&url=http://…
    – Frank
    Commented Mar 21, 2020 at 16:56

One little Japanese secret is this (alas the data was as of 2016):

Of Japan’s net debt of 130% of GDP, about half (66% of GDP) is owed to the Bank of Japan, which the government in turn owns.

By 2018 that percentage was down somewhat

the BOJ owns about 45 percent of the 1 quadrillion yen Japanese government bond (JGB) market, crowding out banks and other investors.

But the BoJ seems solvent, because it owned assets 5 times the market cap of Apple. And even

The BOJ has become the world’s second central bank after the Swiss National Bank and the first among Group of Seven countries to own a pool of assets bigger than the economy it is trying to stimulate.

In contrast a lot more of Greece's debt was owed to other European countries; by 2015 EFSF owned about 60% of Greece's debt, the IMF 10%, and the ECB 6%. So the Eurozone "masters" could demand austerity, asset sales/privatization etc. in Greece.

The BoJ cannot make/impose such demands on the gov't of Japan...

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    This is correct. Also these facts :1) the BoJ returns profits to the treasury , which is effectively writing off 2) the BoJ can write off at will without consequences
    – Frank
    Commented Mar 20, 2020 at 20:26
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    Further I believe the demands the eurozone placed on Greece were political not economical. They just wanted to boot out the tax evading mafia running the place from the credit boom heyday of yesteryear
    – Frank
    Commented Mar 20, 2020 at 20:28
  • Good catch on the BoJ factor.
    – ohwilleke
    Commented Mar 20, 2020 at 21:34

Brief - though partial - answer:

Japan is an independent state, which prints its own currency. Greece is a member of the EU, and its currency, the Euro, is controlled by EU bodies - It could not simply print more Drachmas to pay its debt as an (emergency) measure. The EU insisted it follow an austerity program, which only worsened the economic situation; Japan was not put under this kind of pressure.

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    It's not clear to me why being able to print your own currency, thus devaluing it, makes it ok to continue with a high debt-to-gdp ratio. Much of the issue is investor confidence after all, how can having the ability to make investments worthless by tanking your currency value provide investors with confidence?
    – Jontia
    Commented Mar 20, 2020 at 15:41
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    1. Please don't compare me to states by using the second person like that... 2. Printing more of a state's currency does not necessarily devalue it. It may devalue it. 3. Printing more money can decrease investor confidence, but that's for future investors. 4. A third option may have been a default, but I'm not sure if Greece was allowed to default nor what the effects would have been.
    – einpoklum
    Commented Mar 20, 2020 at 15:45

Japan has a strong industrial base and an export-led economy. Greece, beyond some tourism and some exports in the food industry, didn't have very much and imported a lot more than it could export. Some help was coming from the EU budget, and Greece had always been a net beneficiary of EU budget allocations, but it was not enough.

But the real weak point is that Greece inflated its GDP with a huge number of jobs in the public sector, since they didn't produce very much, and they paid a lot of people to do nothing. At the same time Greece was unwilling to fight corruption and tax evasion. The Goldman Sachs scandal and the huge deficit caused by the mismanagement of the Olympics made things even worse.

When the EU forced the Greek authorities to clean up their accounting, a chunk of their GDP disappeared into nothing and a lot of people in the financial sector knew way before the crisis happened that their accounting was unreliable.

  • Tourism is nothing to be ashamed of and Greece also has a large merchant navy. In fact, Greece also has an export-led economy, how is that an asset?
    – Relaxed
    Commented Mar 20, 2020 at 23:21
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    @Relaxed Nobody criticized tourism. Simply it is not enough to sustain an entire country. The merchant navy is something different. Most of them are not Greek vessels: en.wikipedia.org/wiki/Flag_of_convenience
    – FluidCode
    Commented Mar 20, 2020 at 23:26
  • @FluidCode More accurately, tourism is enough to sustain a country if its citizens and companies pay their way. The Bahamas manages OK, for one - but they don't have the level of institutional corruption that Greece had (and still largely has). As you say, the only thing keeping the Greek economy afloat was essentially embezzling EU money.
    – Graham
    Commented Mar 21, 2020 at 0:32

Percentages are misleading in this case. Looking at the raw GDP numbers paints a clearer picture (metrics from World Bank as reported by Google search)

  • Greece's peak GDP was 354B (0.35T) USD. It's around 200B (0.2T) now, and has been falling for about a decade.
  • Japan's GDP is just under 5T USD, with a peak just over 6T
  • The US (for comparison) has a GDP of 19T

As you can see, Japan has a GDP about 14 times larger than Greece. Greece also has very little trade outside Europe

Greece main exports are petroleum products (29 percent of the total exports), aluminium (5 percent), medicament (4 percent), fruits and nuts, fresh or dried (3 percent), vegetables, prepared or preserved (2 percent) and fish, fresh or frozen (2 percent). Main export partners are: Italy (11 percent of total exports); Germany (7 percent); Turkey (7 percent); Cyprus (6 percent); and Bulgaria (5 percent).

Then there's the debt crisis with the Euro

In 2009, Greece’s budget deficit exceeded 15 percent of its gross domestic product. Fear of default widened the 10-year bond spread and ultimately led to the collapse of Greece’s bond market. This would shut down Greece’s ability to finance further debt repayments. The chart below highlights in red the period when the 10-year government bond yield passed 35 percent until vast debt restructuring forced private bondholders to accept investment losses in exchange for less debt.

The problem there is that if Greece goes down, it might take the Euro with

On the optimistic view, the crisis consisted of the acute risk that a Greek default on its national debt would lead to a cascading series of defaults in Portugal, Spain, Ireland, and maybe even Italy. That series of defaults would crush the European banking system, possibly bankrupt the government of France, and create huge ripple effects in Asia and the United States. Even worse, the mere fear of this scenario was becoming a self-fulfilling prophecy. Investors worried about a Spanish (and Irish, and Portuguese, and Italian) default were pushing up borrowing costs and therefore making a bankruptcy more likely.


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