The United States has accumulated the world’s largest national debt, reaching $39 trillion, yet its debt burden relative to the size of its economy remains below that of Japan and Singapore, according to figures highlighted in a Fortune analysis. Economists, however, argue that these headline statistics conceal significant structural differences that leave the US in a more vulnerable fiscal position despite its comparatively lower debt-to-GDP ratio.
According to the latest International Monetary Fund World Economic Outlook data published in April, US national debt exceeded $39 trillion in May, more than double China’s $18.7 trillion debt. Although the US debt-to-GDP ratio stands at about 126%, it remains considerably lower than Japan’s 204% and Singapore’s 172%, placing the United States outside the very highest rankings when debt is measured relative to economic output.
While debt-to-GDP is widely used as an indicator of fiscal sustainability, economists caution that there is no definitive threshold at which debt becomes dangerous. Japan’s ratio of 204% indicates that its national public debt is more than twice the size of its economy. Even so, the US continues to carry debt that exceeds the value of its entire annual economic output, with its debt ratio remaining above 120%.
Fortune reported that concern among economists centres less on the relative size of US debt than on the speed at which it is expanding. Apollo chief economist Torsten Slok warned that the United States is accumulating debt at a rate of approximately $7 billion per day, steadily reducing the government’s ability to respond effectively during an economic downturn.
According to Slok, the United States has limited fiscal room to introduce measures such as tax cuts or infrastructure spending without increasing borrowing further. At the same time, the Federal Reserve faces constraints in lowering interest rates to stimulate borrowing because doing so could intensify inflationary pressures and weaken demand for newly issued government bonds.
“The U.S. has never entered a recession with this little fiscal buffer,” Slok wrote in a blog post. “The standard recession playbook that growth slows, the Fed cuts, rates fall, and multiples expand breaks down when the sovereign borrower is already stretched.”
The differing assessments of US and Japanese debt levels also reflect major differences in how government borrowing is financed. Around 90% of Japan’s government debt is held domestically by local banks and insurance funds, limiting exposure to foreign investors who could rapidly sell government bonds during periods of financial uncertainty. Japan also maintains household savings worth about one-third of its GDP, roughly double the level in the United States, reducing reliance on overseas bondholders.
“Japan’s debt dynamics are fundamentally different from those of the United States,” Jack Salmon, a research fellow at the Mercatus Center at George Mason University, wrote in a Substack post. “Japan is the world’s largest creditor nation. The U.S. is the world’s largest debtor.”
Nevertheless, Fortune noted that Japan is also facing mounting pressures. The weakening yen, driven by the Iran war pushing up oil prices, US inflation concerns and stronger demand for the dollar, has contributed to rising long-term bond yields. As Japan raises interest rates to contain inflation, the cost of servicing government debt also increases. Prime Minister Sanae Takaichi intends to increase deficit spending to stimulate economic growth, although Salmon warned that doing so risks fuelling inflation further.
“Japan was never a comforting counterexample to concerns about U.S. debt,” Salmon said. “The fact that even Japan is now testing the limits of debt tolerance should finally end the fantasy that advanced economies can borrow without consequence forever.”
The debate has also prompted broader questions over the usefulness of debt-to-GDP as a measure of economic health. Stanford Graduate School of Business professor Jonathan Berk argued that the ratio is comparable to dividing the balance of a home mortgage by one year’s rental income, overlooking other financial obligations and failing to show whether debt is ultimately affordable. “I don’t think it is necessarily the doomsday scenario that people paint,” he said.
