Can Ronald Reagan save Japan from a debt crisis? We're about to find out as Prime Minister Shinzo Abe bets the remaining years of his mandate on the former U.S. president's economic philosophy.
Abe's new plan to curb Japan's debt burden, the world's heaviest at almost 250 percent of GDP, doesn't mention Reagan. But it's impossible not to notice the influence of his widely touted theory that healthy government finances require, above all, a thriving corporate sector. That should worry investors, credit rating companies and the Japanese people alike.
Abe did announce some vague intentions to cap spending and reach a budget surplus in fiscal 2020. But the heart of his strategy for dealing with government debt is stoking broader economic growth. It's a questionable strategy, one that's even more dubious because of where Abe expects this debt-erasing output to come from: giant companies profiting from a weaker yen and a "productivity revolution."