Commentary: The Shadow Budget Haunting Japan

Sure, Japan has been on a debt binge for years. And yes, the numbers are scary. That's why Moody's Investors Service on Feb. 18 warned that it might take yet another notch off of Japan's once-sterling sovereign debt rating, now Aa1, as it did in 1998. Yet Japan still boasts $10 trillion in household savings, $260 billion in foreign exchange reserves, and a huge current account surplus. Given such wealth, why should Japan carry the same credit risk as Italy or Belgium? It seems almost absurd to ask.

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