Those Who Don’t Study History: What Japan’s Debt Crisis Can Teach Us About America’s Future

At Sevey Wealth, we believe responsible financial stewardship starts with understanding history—and applying those lessons to today’s decisions. When it comes to government debt, Japan’s experience stands as one of the most sobering case studies of the last half-century.

As the saying goes:

“Those who cannot remember the past are condemned to repeat it.” – George Santayana

Japan’s debt-fueled stagnation offers a cautionary tale for the United States. But while the parallels are real, the differences between our economies also give the U.S. more tools—and more time—to chart a better path.

The Rise and Stall of Japan’s Economy

In the 1980s, Japan was an economic powerhouse. Fueled by speculative investing and aggressive lending, the country experienced a massive asset bubble—especially in real estate and equities. But when that bubble burst in the early 1990s, the economy fell into what became known as the "Lost Decades."

GDP flatlined. Real wages declined. And to stabilize the economy, the Japanese government dramatically increased spending, running large deficits year after year. Today, Japan’s national debt stands at over 260% of GDP—the highest of any developed country.

Despite efforts to stimulate growth through government spending and loose monetary policy, Japan remains in a slow-growth, aging economic environment. For many younger generations, the country’s best financial years are something they’ve only read about.

Why This Matters to the United States

The U.S. debt-to-GDP ratio is now over 120%, and the government continues to run annual deficits exceeding $1 trillion. Like Japan in the '90s, we’re seeing rising entitlement costs, an aging population, and a political reluctance to curb spending. The risk: over time, debt servicing costs could crowd out other priorities, interest rates could climb, and economic flexibility could erode.

We’ve already seen the effects:

• Interest on the national debt is one of the fastest-growing items in the federal budget.

• Investor confidence has begun to waver. JPMorgan CEO Jamie Dimon recently warned that the U.S. bond market could "crack" under the pressure of unsustainable debt.

• Credit rating agencies have raised concerns about long-term U.S. fiscal discipline.

What Makes the U.S. Different—for Now

The United States is not Japan. And while we take Japan’s experience seriously, we also recognize key differences that may allow us to avoid or delay a similar outcome:

• Demographics: While America is aging, it still has a younger population and higher birthrate than Japan, along with robust immigration that can support a growing workforce.

• Productivity and Innovation: The U.S. economy remains one of the most dynamic in the world, with leadership in technology, entrepreneurship, and higher education.

• Global Reserve Currency: The U.S. dollar is still the world's primary reserve currency, giving the U.S. unique borrowing advantages Japan doesn’t enjoy.

• More Flexible Labor Markets: U.S. businesses and workers tend to adjust more quickly to change, contributing to economic resilience.

These differences provide more time—but not unlimited time.

What We Must Learn

The lesson from Japan isn’t just about numbers. It’s about the cost of delay. Japan’s economy didn’t collapse—but it stagnated. And in a nation that had high hopes for prosperity, that stagnation has felt like a de facto decline.

For the U.S., the path forward must include:

• Serious conversations about debt and deficits.

• Policies that encourage sustainable economic growth.

• A commitment to balancing today’s needs with future generations’ opportunities.

Final Thoughts

We work with clients every day who understand that ignoring debt has consequences—whether it's at the household level or the national level. Our job is to help you stay informed, be prepared, and build a financial strategy that holds up even when policy and politics don’t.

America still has time to act. But if we don’t learn the lessons of Japan’s past, we risk writing our own version of the same story.

Let’s not be the generation that failed to study history.