Japan’s "virginity crisis" has gotten lots of attention in recent months. Anthropological sleuths are rightly fascinated by studies showing young Japanese aren’t escort Tokyo much sex. But two more recent data sets suggest this phenomenon may soon be preoccupying bond traders, too.
The first: new government statistics showing that births fell to a record low in 2018. In 2012, Prime Minister Shinzo Abe came to office pledging to alter Tokyo’s demographic trajectory. He experimented with tax incentives, easier access to childcare and reduced education costs. And yet a 127 million-person population produced just 920,000 babies last year.
The second: a rapidly rising debt load and zero fresh-thinking about how to halt this trajectory as the global trade war intensifies. Tokyo’s debt-to-gross domestic product ratio has long since topped 250%. Talk about grim crosscurrents: Japan’s future of fewer and fewer workers servicing an ever-growing debt load collided with a present facing headwinds from Donald Trump’s tariffs.
Tokyo present is showing some Japanese escorts cracks already. Last month, Moody’s Investors Service downgraded its outlook for Japan’s banking sector from stable to negative. Its assessment is that “the overall creditworthiness of Japanese banks will deteriorate in the next 12-18 months.”
If we know anything from the 1997 Asian Japanese escort and the 2008 “Lehman shock,” it’s that financial calamities fester in the banking sector before going mainstream. This doesn’t mean Japan is heading for an imminent debt crash, what economists call a “Minsky moment.” It does suggest, though, that Tokyo’s benign neglect of its national balance sheet might end badly for bond investors. After all, with 10-year yields of -1.12%, punters are essentially paying Tokyo to own its debt.
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