Japan’s Prime Minister Shigeru Ishiba dropped a financial bombshell this week—declaring Japan’s fiscal situation “worse than Greece’s.”
For context, Greece, once the poster child of debt crises, spent a decade being bailed out by the EU and IMF. So when Japan—a global economic giant—gets compared unfavorably, it’s not a casual remark.
Japan’s Debt Disaster
According to the International Monetary Fund, Japan’s government debt has soared to 234.9% of its GDP. Greece, by contrast, sits at 142.2%. That’s not a typo.
And this isn’t just abstract number-crunching. The real economy shrank by 0.7% in the first quarter of 2025—more than triple market expectations. The cause? Flat household spending and falling exports. Private consumption, which drives more than half of Japan’s GDP, didn’t budge.
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Why It’s Happening
PM Ishiba isn’t sugarcoating things. “Interest rates are turning positive,” he warned in Parliament. “And while tax revenue is up, so are welfare costs.”
Aging population. Rising healthcare bills. Flat wages. And now, thanks to Trump-era tariffs returning with a vengeance, Japan faces a 24% tariff on all exports to the US—plus a brutal 25% on cars, one of its biggest industries.
So no, Japan’s not printing money out of boredom. It’s trying to plug a leaking ship with a paper umbrella.
It’s easy to panic. But here’s what sets Japan apart: 80% of its debt is owned by its own citizens, not foreign investors. That gives Japan far more control over its fate than Greece ever had.
Plus, Japan has leverage. As of March, it holds $1.13 trillion in US Treasuries—making it America’s biggest foreign creditor. In other words, Tokyo owns a serious chunk of Washington’s IOUs.
Still, irony abounds. The same week Ishiba made his gloomy forecast, the US lost its AAA credit rating—blame a $36 trillion national debt and plans for more tax cuts.
A Recession on the Horizon?
Analysts aren’t optimistic. BNP Paribas warns that Japan could enter a recession soon, with little growth momentum left. And unless Trump’s tariffs are lifted—or a miracle trade deal appears—Japan could sink deeper.
Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute, summed it up: “Japan’s economy lacks a growth driver. It’s vulnerable to shocks.”
So, What Now?
PM Ishiba is resisting opposition calls for tax cuts ahead of elections. But pressure is mounting. If the economy continues to shrink and public anger grows, Ishiba may have to open the spending taps—again.
The only certainty? Japan is in a fiscal squeeze. And this time, even being a US ally doesn’t come with a discount.
Japan isn’t Greece—but if it doesn’t course-correct soon, it might rhyme.
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