Eli5: How can some country have trillions of dollar in debt like Japan but still functional without any consequences?

Question

Eli5: How can some country have trillions of dollar in debt like Japan but still functional without any consequences?

In: 101

Answer 1

Japan is VERY boring (in a good way). It has a stable society. The stability is vital – its when political events start getting “weird” that people have a tendency to take their money off debt and secure it elsewhere.

Most of that debt is internal, and at low interest rates. Japanese citizens are very prone to saving, so they finance the country.

Also because its internal, even the interest paid on that debt flows either back into savings or into the economy, so its not that harmful – unlike “exporting” money abroad. Countrywise, you’re paying interest to yourself…

In short, nobody expects Japan to simply stop paying debt, so its a safe bet – and in a world of uncertainty, that actually becomes more valuable.