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Does Japan Vindicate Modern Monetary Theory? by Takatoshi Ito

Ponzi Scheme

Does Japan Vindicate Modern Monetary Theory? by Takatoshi Ito

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For decades, the Japanese government has amassed more and more debt without triggering higher borrowing costs or inflation. But there is no such thing as a free lunch, and in Japan’s case, it is future generations who will be left with the bill.

TOKYO – Public debt has soared since the 2008 financial crisis, and especially during the COVID-19 pandemic. According to the International Monetary Fund, the ratio of public debt to GDP in advanced economies increased from around 70% in 2007 to 124% in 2020. But the fear that rising public debt will fuel future financial crises has been subdued, partly because government bond yields have been so low for so long.

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