Japan – National Debt

Globally, Japan has one of the largest gross domestic products, making it among the largest economies in the world. 

Below is a graph analysing the trends of Japan's national debt as a percentage of their national gross GDP. In 2019, Japan had around $12.2 trillion USD in debt, which is around half the debt that the United States owes, however, in relation to the size of its economy, it is huge as it is around 240%. 

The global coronavirus epidemic has forced Japan to secure a large loan to support its citizens – for the fiscal year starting in April 2021, there will be a $1.03 trillion budget draft for the epidemic. 

Other than the global epidemic, wherein countries need to respond to their citizens' needs, Tokyo (Japan's capital) hosted the 2020 Olympics. This has caused Japan an estimated $15 billion USD. These costs included displacement costs (many Tokyo public housing were demolished to make room for the stadium). Many countries that previously hosted the Olympics also had increased costs other than the initial costs needed for hosting the games.

This current fiscal year, Japan will be issuing new Japanese government bonds (JGBs) worth approximately $1.018 trillion USD, more than double the amount in fiscal 2009 when the global financial crisis was occurring. Currently, the priority is to lessen the economic impact of the epidemic, as well support the citizens and pay COVID-related costs, however, the government is not yet thinking of how to pay the debt back. 

 

Canada - Budget and National Debt

A government's budget and debt determine how much it is able to use monetary policy to influence the economy and fund initiatives. If a government has high debt, it will find it much harder to borrow money to finance new projects and justify such spending and vice versa.

Figure 1: Canada's budget balance as a percentage of GDP

Canada's budget was at a relatively healthy level prior to the COVID pandemic, increasing steadily year on year from a budget deficit of -0.45% in 2016 to a budget surplus of 0.54% in 2019. This is an extremely healthy level for the government budget to be in, putting the Canadian government in a good position to create new initiatives and borrow money if needed in a crisis.

Conveniently, such a crisis came along in the form of COVID, pushing the Canadian economy into a recession, with the nation's unemployment spiking to 13.5%. Social distancing rules restricted economic activity and many companies considered mass layoffs of workers.

In response to the pandemic, Canada has created large spending programs to both instigate economic activity and work toward the government's other goals, including transitioning to greener energy, improving education and increasing vaccine production. Transfer payments to households in need have also increased by over 100 billion CAD$ from 2019 to 2020. Businesses also received over 80 billion CAD$ in wage subsidies in 2020. This spending has put a massive imbalance in Canada's national budget, creating a deficit of over 10% relative to GDP in less than a year. Although the Canadian budget is projected to recover by as soon as 2024-2025, this can only be achieved through spending cuts over the next few years, which would stifle and perhaps impend several of the newly created projects and reduce the government's ability to survive another downturn, should one come.

Figure 2: Canada's national debt (Billion CAD$)

Canada's national debt has been on an upward trend over the previous few years under the Trudeau government, with the smallest increase being between 2014-2015 of just under 3 billion CAD$. The COVID pandemic and resultant government spending caused an increase of just over 35 billion CAD$ in 2020 alone, with surely more to come in 2021 as the minister of finance created large spending programs to "kill the recession". These large spending plans have been predicted to push the government debt to over 1 trillion CAD$ by 2022, representing 51.2% of GDP. It remains to be seen how the Canadian government will deal with these mounting debts: attempting to pay them off too soon would cut necessary funding sustaining other government ventures generating much needed economic activity, but clearly these increases are not sustainable in the long run either.

New Zealand - Budget and National Debt

New Zealand National Budget 2021 The Minister of Finance, Hon Grant Robertson, delivered the The Wellbeing Budget of 2021 on Thursday, 20 May 2021. According to New Zealand’s The Treasury, “Budget 2021 supports the long-term wellbeing of New Zealanders by making significant progress towards our Government priorities this term to: • continue to keep Aotearoa New Zealand safe from COVID-19 • accelerate the recovery and rebuild from the impacts of COVID-19, and • lay the foundations for the future, including addressing key issues, such as our climate change response, housing affordability and child poverty In addition to a core $3.8 billion operating per year Budget 2021 package, we are funding a number of initiatives from the COVID-19 Response and Recovery Fund (CRRF) to support our recovery and rebuild from COVID-19. The CRRF retains a $5.1 billion buffer for us to respond to future resurgences of COVID-19.” Figure 1. New Zealand: Budget balance between 2016 to 2026 in relation to GDP New Zealand’s budget balance in relation to its GDP has consistently been above 1% prior to 2019; however, it has experienced another significant disruption in 2019 causing a large change in it’s figures. The budget has decreased by -3.41% from 2018 to 2019 and experienced an even drastic drop from 2019 to 2020 of -3.43%. This is likely due to the government shifting to a more wellbeing-based in terms of their overall priority and objective and, als, may have been affected by the COVID-19 situation. Likely caused by large decreases in economic activity due to tourist bans and other factors. National Debt Figure 2. New Zealand: National debt from 2016 to 2026 in billion U.S. dollars Prior to 2019, the trend for New Zealand’s national debt has been projecting downwards; however, it experienced a significant disruption in 2019 and has an upward projection from 2019 onwards. This is likely due to the COVID-19 pandemic situation which brought New Zealand into minimal lockdowns and tourist bans. New Zealand, debt, budget, fiscal policy, aggregate demand Links: https://www.treasury.govt.nz/publications/budgets/budget-2021 https://www.treasury.govt.nz/sites/default/files/2021-05/b21-at-a-glance.pdf https://www.statista.com/statistics/531824/national-debt-of-new-zealand/ https://www.statista.com/statistics/436525/new-zealand-budget-balance-in-relation-to-gdp/

France - Wellbeing

 OECD Better Life Index

---

France’s ranking - 18th out of 38 countries

What they scored highest in - Work/life balance (8.7/10)

What they scored lowest in - Income (4.4/10)

Figure 2.1 - OECD Better Life Index for France

(http://www.oecdbetterlifeindex.org/countries/france/) 

France ranks well in terms of having a good work-life balance, people feeling safe and a healthy population. 

However, their most alarming issue is their relatively low score of 4.4 for income, the average household disposable income per capita is USD 31,304 a year which is lower than the OECD average of USD 33,604. Interestingly though, this does not mean the whole population is poor, instead, France suffers from a poor distribution of income. The top 20% of the population earn around 4 times as much as the bottom 20%. A potential solution to this would be opting for more progressive taxes i.e) the percentage of income paid in tax increases as incomes increase. This would help the French government achieve one of its microeconomic objectives, a fairer redistribution of income. 

Happiness Index

---

France’s ranking - 20th out of 150 countries

Score	GDP per capita	Social support	Healthy life expectancy	Freedom to make choices	Generosity	Perception of corruption
6.664/10	1.268	1.459	1.030	0.514	0.113	0.227

Figure 2.2 - France ranking in 2020 World Happiness Report https://en.wikipedia.org/wiki/World_Happiness_Report#cite_note-47 

France scores lowest in terms of its generosity, this is not surprising considering in the OECD better life index, France suffers from low scores for income and also a poor distribution of income. Hence many may feel a lack of generosity typical of a capitalist society where the rich tend to get richer as the poor get poorer with little support. 

Happy Planet Index Ranking

---

France ranking - 44th out of 140 countries, HPI score 30.4

What they scored highest in - Life expectancy (10th of 140 countries)

What they scored lowest in - Ecological footprint (111th of 140 countries)

Figure 2.2 - Happy Planet Index for France 

(http://happyplanetindex.org/countries/france)

France ranks highly for its lack of inequality, good wellbeing and high life expectancy so it was fairly surprising that it ranked 44th out of 140 countries contradictory of its high rankings in these variables. 

What hurts France the most is its poor ecological footprint, ranked 111th of 140, France joins many first world countries culprit of having alarmingly high ecological footprints. France consumes 5.1 global hectares per person, this high value is synonymous for many first world countries who due to their wealthy economies consume relatively more goods and services then poorer nations and so have a greater economic footprint per individual.  

That is to say, even if a poorer nation may have a larger population and so consume more goods and services overall, the amount of goods and services per capita divides total consumption by population to give a more accurate representation of a country's ecological footprint. The average person in a first world country will likely consume more than the average person in a third world country. 

This index would prove the reason why France should focus less on its GDP and more on its ecological footprint. GDP represents the real output of a country, if a country prioritises GDP growth a byproduct would be the negative externalities associated with both producing and in turn consuming these goods and services. The more goods and services produced, the more pollution produced, the more natural resources used, etc. Hence by prioritising GDP growth, France’s opportunity cost would be the worsened ecological footprint. 

The budget and national debt

France 2016-2020
Year	Government debt as a % of GDP	Budget surplus (+) or deficit (-) as % of GDP
2016	94.9	-3.60
2017	95.6	-3.00
2018	98.0	-2.30
2019	97.6	-3.10
2020	115.7	-9.20

Figure 3.1 - France's government debt as a % of GDP and budget as % of GDP between 2016 and 2020

https://tradingeconomics.com/france/government-budget 

https://tradingeconomics.com/france/government-debt-to-gdp 

Between 2016 and 2020 France consistently maintained a budget deficit, however, between 2016 and 2019 this value was relatively stable, not fluctuating excessively. In 2020, the coronavirus changed this and France suffered a budget deficit 3x that of the previous year. This was due to France’s response to the global pandemic. In particular 26% of GDP was accumulated to be used for emergencies and recovery measures. (https://www.imf.org/en/News/Articles/2021/01/15/na011921-five-charts-on-frances-policy-priorities-to-navigate-the-covid19-crisis) This is common by many governments, money is borrowed to respond to emergency situations whether that be natural disasters, financial crisis or military related situations. However, this means national debt increase as a result.