In 2013, Japans debt load has passed the numerically numbing level of U1 quadrillion. Thats fifteen zeroes: U1,000,000,000,000,000. Or, to be exact, U1,008,628,000,000,000, as of the end of June. (In US dollar terms, its a bit less than $10 - Essay Example

Macro & Micro economics Table of Contents Macro & Micro economics Table of Contents 2 Introduction 3 Discussion 3 Conclusion 5 References 7 Introduction According to a survey, it is found that among all other nations of the world, Japan is one nation whose debt is extremely high. Moreover, Japan is a developing nation and thus it becomes a problem for the country to pay off its debts as compared to other developed nations. At present, the total debt of Japan has reached up to ¥1,000,000,000,000,000 and at the end of June 2015, it is expected to rise up to ¥1,008,628,000,000,000, which is a huge amount for the country to repay and also a major concern for the country.

In terms of U.S. dollar, the amount is about $10.5 trillion, which displays much lower than that of the Japanese currency. It is therefore necessary for the government to focus on the issue and take necessary measures that would help in paying off the debts and place the country in a stable position. However, raising the tax rates and cutting off the spending of people would not be a wise decision to mitigate the problem. Rather, it is necessary for the country to increase the GDP that would help to balance the debt and GDP.

Lowering the debt to GDP ratio of the country would serve beneficial for the company in order to overcome the challenges that are faced due to high amount of debts rather than cutting down the spending and raising the taxes of people1. Discussion As per the report of 2013, it has been found that the total debt of Japan has reached up to 1,000 trillion yen, which is recorded first time in the history of any developing nations of the world2. However, the government of the country is in a great concern regarding the way to reduce this high amount of debt as the economy of the country is still in the developing stage.

Therefore, high debt ratio of the country would negatively affect the economy of the country. There may be a possible way through which the country can minimize its total debt, i.e. by increasing the rate of tax payable by people of the country as well as cutting the spending. However, this would not be feasible for the government to impose such strategies, as it would have a negative effect upon the people of the country. Increasing the tax rate would create difficulty for people to pay higher rate of taxes because of less per capita income of the country that result in lower GDP of the country.

It would rather be profitable for the country to focus on increasing the GDP of the country. At present, the GDP of Japan contributes to about 7.9 percent of the overall economy of the world. As per the record in the year 2013, the GDP of Japan worth $4901 USD 3. However, maintaining a balance between debts to GDP ratio would help the country to minimize the burden of debt. This is because the debt will be mitigated with the increased GDP of the country and therefore the government is recommended to focus on this issue.

However, the debt to GDP ratio may be referred to as the ratio of the national debt of a country to the total GDP of that country. It is important for a country to balance its debt as well as its GDP growth for the development of the economy. Debt to GDP ratio therefore signifies the ability of a country to pay off its debt through comparing the total outstanding of a country with its total production. If the debt to GDP ratio of a country is higher, it becomes difficulty for a country in mitigating its external debts and therefore the creditors will charge a higher rate of interest while lending to these countries.

Having default to pay off the debts would create a great threat for the country in both domestic as well as national environment. Therefore, a higher debt to GDP ratio would represent that there is a less possibility of the country to pay off its debts and thus the risk of default is also higher. However, lowering the debt to GDP ratio would be beneficial for a country because it creates a positive impact on the country and therefore it would not face any difficulty in borrowing credit4. Similarly, lowering the debt to GDP ratio of Japan would help in minimizing the total debt of the country, which is about ¥1,000,000,000,000,000.

The ratio can be lowered by boosting the GDP of the country. Gross domestic product generally refers to the sum total of the value of products and services that are produced in a country that helps in determining the economic position. However, there are various ways through which Japan can increase the GDP for effective results and development of nation on the global platform. Firstly, the government can adopt measures that would help in increasing the economic activity of the country by promoting the establishments of new industries as well as job opportunities in the country.

Moreover, the government may also make some changes in its fiscal policies that would help the country to boost the GDP and thereby lower the debt to GDP ratio, which in turn will lower the total debt of the country5. Conclusion Thus, it can be concluded that the high amount of debt being possessed by Japan would lead to the economic downfall of the country. Thus, it is necessary for the government to take necessary measures that would seem effective to overcome the challenge. However, it is believed that increasing the tax rate and reducing the spending of people would not be a wise decision for the country because the ultimate sufferer would be the people of the country.

Therefore, it is recommended to boost up the total GDP of the country in order to lower the debt to GDP ratio that in turn will help in balancing the debt with the total debt of the country. The country can increase the GDP by increasing its economic activities and by making a positive reform in the fiscal policy. References Bloomberg, ‘Japan’s Debt Exceeds 1 Quadrillion Yen as Abe Mulls Tax Rise, Article, http://www.bloomberg.com/news/articles/2013-08-09/japan-s-debt-surpasses-1-quadrillion-yen-as-abe-weighs-tax-rise (accessed 23 March 2015) Phillips, M.

‘With a quadrillion in debt, there’s only one way out for Japan’, Article, http://qz.com/113948/with-a-quadrillion-in-debt-theres-only-one-way-out-for-japan/ (accessed 23 March 2015) Trading Economics, ‘Japan GDP’, Article, http://www.tradingeconomics.com/japan/gdp (accessed 23 March 2015)