Japan's Crisis, Italy's Warning: When Debt Becomes Destiny

Project Syndicate published a stark commentary this week by Desmond Lachman, arguing that Japan's deepening currency and bond-market crisis should alarm other countries on "unsustainable fiscal paths." Italy is named alongside France, the United Kingdom, and the United States as a nation facing comparable vulnerabilities. The argument is straightforward: Japan has spent over $70 billion propping up its yen, which has nonetheless slumped to a 40-year low; long-term bond yields have surged as the Bank of Japan ended yield-curve control. The pattern, Lachman warns, often spreads. When one major economy enters crisis, investors turn their gaze to others with similar structural weaknesses.

Italy's place in this warning is not incidental. The country carries a public debt burden that has long preoccupied international observers—a debt-to-GDP ratio that remains among Europe's highest. The spread between Italian and German bond yields has been a barometer of eurozone health for years. What Lachman is saying is that complacency about such ratios can be fatal. Japan did not wake to its crisis overnight; it arrived through a long accumulation of choices deferred. The question for Italy is whether the fiscal discipline required to avoid Japan's fate can be sustained through political cycles and competing demands.

We do not know whether Italy faces Japan's trajectory. But Lachman's argument deserves serious consideration: fiscal sustainability is not a technical matter to be managed by central banks alone. It is a political choice, renewed year after year. Italy's government and Parliament should read this not as an insult but as a mirror held up by the world. The cost of inaction compounds.