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

What consequences would you expect there to be? There ARE consequences for having such a large national debt, see how Moody’s downgraded Japanese debt to Aa3 to A1 recently, still considered prime but the 4th rung of creditworthiness they have.

To be honest, most of the consequences of having a high national debt are fairly difficult to explain because they require a lot of financial literacy, and even then a lot is based on subjective impressions of a debtor, not some sort of science.

To try and put it simply, a country issuing debt is a core feature of the modern nation state and no country on earth could function without that ability. Debt is how you have the liquidity to do anything, and as long as you don’t default or restructure your debt, there is very little reason that debt would be seen as a negative.