New Japanese Prime Minister Naoto Kan says his country is at "risk of collapse" with its large deficit, comparing Japan to Greece and advocating immediate action to prevent a similar crisis. Cries of various countries being "the next Greece" have come frequently because if another country were to head toward default, the results could be catastrophic. But are things really as bad in Japan as they appear?

  • A Couple Odd Things About This Statement Business Insider's Gus Lubin points out Prime Minister Kan's inconsistency: when finance minister, he "advocated loose monetary policy to end two decades of deflation." His change in job title coincided with a switch to "crying out about public debt levels." Putting together a quote from a Credit Suisse analyst in the Guardian with the examples of California, Hungary, and the U.S. invoking Greece as a "signal phrase for fiscal reform," Lubin suggests Kan "may be overplaying the similarity [with] Greece" to drum up support for new policies. The problem, of course, is that he'll have to try to "pull off the mythical trick of reducing government spending while stimulating private sector spending."
  • Confirmed: Needless Worry 24/7 Wall St.'s Douglas McIntyre wastes no time making his thoughts clear:
[Kan's] vision of the future is flawed. Japan is the second largest nation in the world as measured by GDP. It is also among the world's five biggest exporters. While its national debt is dangerously large, the odds that it would default on its sovereign obligations are small, particularly because the country is likely to implement "Europe-like" austerity measures.
  • Two Sides to the Story BBC's Roland Buerk, analyzing the situation, provides some support for Lubin's and McIntyre's take: "not everyone is convinced Japan, with its huge trade surplus, is doomed. And Mr Kan may simply be easing the way towards raising consumption tax and reneging on spending pledges made during last year's election."That said, he points out that "Pessimists have long warned that rising debt and a falling population mean Japan is headed for a point of no return."
  • Reasons to Be Pessimistic Catherine Rampell at The New York Times' Economix blog posts some of the thoughts of one such pessimist, Edward Hugh, considered "an unheeded Cassandra about Europe's fiscal problems," now very much in the limelight for his prior predictions. Hugh argues that the Japanese have been rather "profligate (at the public sector level), reassured by the idea that since they print their own money, and the central bank buys up the government bonds, they don't have a problem, but they do ... One day they will run out of savings, and they will be catapulted back into inflation with a vengeance, at which point all hell will break loose in global financial markets."
  • Kan's Sense of Urgency Marc Chandler at Credit Writedowns notes general consensus is that Kan "wants [a medium-term and long-term fiscal strategy] in hand going into the G20 summit in Toronto June 26-27." What might those plans include? "Among other things ... a freeze on spending at this fiscal year's level for the next three years and a retail sale tax increase."