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Japan

A Japanese girl smiles in a Tokyo city street. Japan is America's second-largest foreign creditor.

Ryan McVay/Lifesize/Thinkstock

Creditor Name: Japan

Amount of U.S. Debt Owned (January 2013): $1.12 trillion

Percent of U.S. Public Debt (January 2013): 9.6 percent

We've been talking a lot about America's debt problem, but how does U.S. indebtedness compare to other industrialized nations? The most useful debt measurement is to calculate the ratio of public debt to gross domestic product (GDP). At the end of 2012, U.S. public debt totaled 73 percent of GDP, meaning the U.S. borrowed the equivalent of nearly three-quarters of what it earned in 2012 [source: [source: CIA World Factbook].

Although a 73 percent debt-to-GDP ratio isn't ideal, it's a heck of a lot better than the situation in Japan, where public debt represents a mind-blowing 219 percent of GDP [source: CIA World Factbook]. How can the Japanese economy support such a lopsided debt-to-earnings ratio?

It turns out that Japan's debt, while incredibly high, is not unsustainable. The Japanese economy is still very strong. It boasts the world's fourth-largest GDP, and unemployment is below 5 percent. But the biggest difference between Japanese and American debt is that Japanese citizens own 95 percent of their country's debt, with only 5 percent in the hands of foreigners [source: Sauter]. In contrast, around 47 percent of U.S. debt is owned by foreign investors, a far riskier proposition.

Another reason the Japanese economy remains so stable is that Japan is heavily invested in U.S. debt securities, some of the most financially sound investments in the world. The only foreign country that lends more money to America is Japan's massive neighbor to the West, and No. 2 on our list: China.

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