When even Paul Krugman is worried about the national debt, you know you have a problem. The country in question isn't Greece or the United States, but Japan.
With low unemployment and high labor force participation, Japan has essentially no idle resources. The scope for boosting the economy with fiscal stimulus or easy money is almost nil. But Japan continues to run an enormous budget deficit every year. In 2014, the government had a deficit of 7.7 percent of gross domestic product, with a primary deficit — which excludes interest payments — of just under 6 percent.
Things are looking somewhat better for 2015. A hike in the consumption tax in 2014 has swelled revenues. Government coffers have also been boosted by increased profits at Japanese companies — which is then subject to the country's high corporate tax rate. As a result, the primary deficit is projected to be only about 3.3 percent in 2015.
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