The Daily Interview: Matthews Japan Fund's Mark Headley

Japan is not a country whose bureaucrats are known for speaking blunt truths. So when its finance minister last week said the country's finances were approaching catastrophe, investors were seriously rattled.

It wasn't the first time Japan has unnerved investors, of course, but after a decade of economic pain the situation has worsened. Government debt has continued to tick upward, with some estimates predicting it will reach 130% of economic output by the end of this month.

Standard & Poor's recently cut Japan's once-sterling credit rating. Amid widespread consumer fears, deflation has taken hold, with prices dropping 1.1% last year. And now there's another worry unsettling Japanese markets: the possibility of recession in the U.S. Against this messy backdrop, the benchmark Nikkei dropped to a 16-year low Monday. ...