Japan increasingly alarmed U.S. may miss debt deadline: sources
By Tomasz Janowski | TOKYO (Reuters) - Japan is increasingly alarmed that the United States may miss the August 2 deadline for raising its debt ceiling and Tokyo fears markets may be too optimistic about prospects of a lasting solution to the crisis, sources familiar with Japan's international and monetary affairs said.
Officials still hope Washington can manage to strike a last-minute deal and even if that proves impossible, will give priority to interest payments to international holders of U.S. Treasury debt to limit the immediate market impact, the sources said.
But Tokyo's concern is that if the crisis drags on without clear and sustainable resolution, markets may be thrown into turmoil, just like it happened when Lehman Brothers collapsed in September 2008.
"There is nothing really concrete that supports the still predominant view that the U.S. will somehow clinch a deal in time and avoid default," said one of the sources.
"If there is a default, the impact on global markets will be huge."
Another source confirmed this view. "Nobody thought Washington would let Lehman collapse. But look what happened," the official, who declined to be named because of the sensitivity of the matter, said Sunday.
Comment: Accumulating such a mountain of foreign debt by Japan has been a crazy affair from the start and if the money should vanish it almost may seem as well deserved.
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