How will Japan pay for reconstruction?

By R.A. | WASHINGTON

MANY people have linked to Robert Peston's nice piece on the potential obstacle to Japanese recovery posed by its high debt level. Japanese sovereign debt is in a league all its own. Its gross-debt-to-GDP ratio may reach 228% this year—more than twice the ratio in America. There is some concern that reduced expectations for growth associated with the immediate disaster may combine with expectations for increased spending associated with the reconstruction effort may shift debt worries in a definitive fashion. Maybe, it's suggested, markets will finally tire of holding Japanese debt and (another) crisis will strike.

Two factors lean against this argument. One is that Japanese households are voracious savers and hold much of Japan's outstanding debt. This structural feature of the Japanese economy makes a sudden flight from Japanese debt unlikely. OF course, someone has to keep buying the newly issued debt, of which there is plenty. Japan's savers might be willing, but amid crisis it's not clear that they'll be as able.