Okay, we can use total government expenditure rather than central - that's probably a better measure. But the numbers I saw for the Brazilian federal government showed constant government expenditures as a percent of GDP from 1995 to 2015. Have the states been increasing their expenditures while the federal government stays constant, or is there some reason to believe the World Bank is just completely wrong?You're using wrong numbers for Brazil, or rather, the World Bank numbers you quoted probably refer only to central government spending. The total government expenditure in Brazil is actually 39.1% of GDP, so even higher than the 36% I mentioned earlier. This is indeed an "outrageous" level for a developing economy. Contrast to 23.9% in China, 26,6% in Mexico and 23.2% in Chile. You can check the whole list here.
Japan deliberately doesn't collect as much in taxes as most European countries, and chooses to run a perpetual deficit instead. Are you saying that this is a policy choice that should have no consequence for yields, because the government could theoretically raise taxes eventually if yields spike?So the story is pretty much what I said. Japan has a much higher debt, but it also has a much lower tax burden and government spending. It has thus enormous room to raise taxes and run surpluses. Brazil has the the one of the highest tax burdens and government spending of the developing world, and much of that spending is constitutionally mandated. There is thus very little room to raise taxes or run surpluses. So from the POV of bondholders, despite its much larger debt, Japan is much safer than Brazil.
I can think of one problem off the bat: its growth rate bumps along at nearly 0 even with the deficit. Should they increase taxes, their economy will likely contract, lowering the amount they'd actually get from their higher tax rate.
IIRC, the vast majority of Japanese debt is domestic, and their population is unusually willing to put their money in domestic bonds to keep it safe despite the negligible yield. If that's true, that would be a big part of the puzzle. It still doesn't really explain why the rest of the developed world is capable of running deficits beyond their growth rate with little consequence, though.
I said this:BTW, bond yields can jump for developed countries when they run unsustainable deficits as well, just ask Greece or Portugal. There's no need to resort to third-worldist BS to explain what basic economics explains just fine. It's all about ability to repay to the debt.
In developed countries (excluding individual Eurozone members), deficits exceeding GDP growth can be run indefinitely provided they're not totally extreme, and nothing really happens to bond yields or the inflation rate.
I left out individual Eurozone countries because they are not using their own currency and are chained to the monetary policies of the ECB. Portugal and Greece need to earn Euros to pay their debt, and have no control over their issuance. Subnational entities like US states are also in the same category.
I don't have a Third Worldist belief about how government finance works, or at least I don't want to. I'm just pointing out a pattern that seems pretty consistent.