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Japan's Setting Sun...

The sun is quickly setting on the country whose motto is the 'land of the rising sun.'

But the economic cancer, known as Keynesian economics, is killing the Japanese economy just as surely as real cancer devastates the human body.

And while Keynesian cancer can be cured, it's only possible if the patient receives swift, and often painful, treatment - something antithetical to modern political hacks.

Because of Japan's reticence in dealing with its condition, the Keynesian cancer ravaging the country has entered Stage IV with virtually no chance of recovery for the once formidable economic power.

Thus, the sun is destined to set on Japan, and there is almost nothing to slow its inevitable decline.

The tragedy of Japan is worsened by the knowledge that Japan didn't need to travel down this road paved with good intentions and sloppy academic rigor. Unfortunately, the United States is destined to repeat Japan's mistakes, leading to a similar fate - we're just a decade or so behind our Japanese friends

Japan's sovereign debt exceeds 240% of GDP, and its recent increase in its sales tax from 5% to 8% will accomplish nothing to mitigate the death spiral of uncontrolled spending.

Japan's household savings rate has steadily fallen from nearly 25% in the 1970s to about 3% today. And while this reduction in savings occurred, Japan's population of retirees reached nearly 40% of the population. In the years ahead, Japan's savings rate will certainly go negative as more and more households are forced to liquidate savings for current consumption.

In addition to the steadily declining savings rate, Japan's current account surplus is about to disappear, which will force the country into unknown territory. Japan will be forced to steadily liquidate foreign investments to cover its current consumption expenses - often at fire sale prices!

Steepening the death spiral, this sale of foreign assets will significantly impact Japan's foreign earnings, thereby accelerating Japan's growing deficit.

How will Japan raise the capital to cover its growing expenses?

Japan must attract foreign capital. And lots of it!

But with its rising risk of default, Japan will have to pay a premium for access to foreign capital - perhaps as high as 4 - 5%.

Here's the kicker…

At current Bank of Japan (BOJ) bond rates of 0.6%, nearly 25% of government revenue is consumed by interest payments alone! If rates were to go up any significant degree, it's lights out for Japan.

To illustrate, at current debt levels, a mere 200 basis point increase in interest rates will consume virtually 100% of Japanese revenue, forcing the Ministry of Finance to raise taxes by wide margins - which will further exacerbate Japanese economic woes.

Is there any hope for Japan?

There is one way for Japan to avoid the inevitable catastrophe of the Keynesian methodology, but it comes at a high cost...

Japan must radically raise taxes while also drastically cutting social spending - two very unpopular choices for voters and politicians alike.

Yet, there is no other way to kill the Keynesian cancer if Japan hopes to survive.

Keynesian economics is a merciless nation killer, and this fact should be tattooed to every politician's forehead around the world - and especially in Washington, D.C.