The IMF recently released a worrisome report about Japan’s growing fiscal deficits. The nation’s second-biggest economy has injected several hundred billion dollars in stimulus money into its economy in the hope of avoiding recession.
That seems to be working as Japan’s recovery is gaining strength. The IMF believes GDP will grow by about 2 percent in 2010 and 2011. But, the risk is that tax revenues are dropping and the government is racking up huge deficits. That could be a big problem down the road.
“With global scrutiny of public finances increasing, the need for early and credible fiscal adjustment has become critical. The fiscal response to last year’s recession was necessary and effective, but has pushed public debt to unprecedented levels."
IMF Points to Japan as Next Trouble Spot [24/7 Wall St.]