In the wake of the earthquake and tsunami of March 11, Western credit rating agencies one after another made downward revisions in their assessments of Japanese government bonds. The reasons are not hard to understand. Japan’s ability to sustain its social security system had come into question even before the catastrophe, and the outlook for public finances was further darkened by various spending schemes introduced by the Democratic Party of Japan after it took power in September 2009. Moreover, the anticipated upturn in revenues had been slow to appear.On top of this, the natural disaster made an expansion in government expenditures on recovery and reconstruction inevitable. When one also takes into account the burden on the government stemming from the damage and losses caused by the nuclear power plant accident, one can see that public finances are likely to be in desperate straits for decades to come. In the meantime, seeing what happened in Japan, people around the world became increasingly concerned about the risks of natural disasters, and nowhere are the risks higher than in Tokyo and other Japanese cities. Read More
