National debt of Japan

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Government debt as a percent of GDP by IMF (2018)

In 2013, the Japanese public debt exceeded one quadrillion yen (US$10.46 trillion), which is more than twice the country's annual gross domestic product.[1][2]

By 2015, the figure rose to US$11.06 trillion. As the country adopted key economic initiatives, this figure started to dip so that by the end of December 2017, the debt stood at US$9.94 trillion.[3]

In August 2011, Moody's rating cuts Japan's long-term sovereign debt rating by one notch to Aa3 from Aa2 in line with the size of the country's deficit and borrowing level. The large budget deficits and government debt since the 2008-09 global recession and followed by earthquake and tsunami in March 2011 contributed to the ratings downgrade. In 2012 the Organisation for Economic Co-operation and Development (OECD) Yearbook editorial stated that Japan's "debt rose above 200% of GDP partly as a consequence of the tragic earthquake and the related reconstruction efforts."[4] Due to the ballooning debt, former Prime Minister Naoto Kan called the situation "urgent."[5] Indeed, by 2014, Japan had the world's highest debt per GDP.[6][7]

Addressing public debt[edit]

In order to address the Japanese budget gap and growing national debt, the Japanese National Diet - at the urging of Prime Minister Yoshihiko Noda of the Democratic Party of Japan (DPJ) - passed a bill in June 2012 to double the national consumption tax to 10%.[8] This increased the tax to 8% in April 2014.[9] The originally scheduled 10% tax increase to be implemented in October 2015 has been delayed until at least October 2019.[10] The goal of this increase was to halt the growth of the public debt by 2015, although reducing the debt would require further measures.[11] The DPJ subsequently lost control of the Diet in late 2012, and Noda's successor Shinzo Abe, of the Liberal Democratic Party, implemented the "Abenomics" program, which involved an additional 10.3 trillion yen of economic stimulus spending to balance out the negative impact of the consumption tax increase on economic growth.[11]

Abenomics led to rapid appreciation in the Japanese stock market in early 2013 without significantly impacting Japanese government bond yields, although 10-year forward rates rose slightly.[12] Around 70% of Japanese government bonds are purchased by the Bank of Japan, and much of the remainder are purchased by Japanese banks and trust funds, which largely insulates the prices and yields of such bonds from the effects of the global bond market and reduces their sensitivity to credit rating changes.[13] Betting against Japanese government bonds has become known as the "widowmaker trade" due to their price resilience despite fundamentals to the contrary.[12]

Notwithstanding the stability of the market for Japanese government debt, the cost of servicing Japan's public debt uses up half of the state's tax revenues, and the cost of importing energy in the wake of the 2011 Fukushima disaster has also negatively impacted Japan's longstanding current account surplus.[11]


In 1944, during the Pacific War, the amount of governmental debt exceeded domestic income  [jp] by 260%.[14]

The Japanese government enacted the Public Finance Law (of Japan) [jp] where the amount of issued national bonds exceeded the revenue in 1947 (Shōwa 22) in anticipation of the economic crisis that would ensue once the war was concluded. There was an uptick in the inflation after the war, and the government had taken the position of balanced fiscal policy by prohibiting: 1) the issuance of the deficit-covering bond (of Japan) [jp], and, 2) the Bank of Japan from buying off the deficit-covering bond. Since the establishment of the 1955 System, the amount of held valuable securities in the bank - especially national bonds - had risen significantly. However, the 1965 budget (Shōwa 40) issued 259 billion yen in deficit-covering bonds, and the next year's budget in 1966 (Shōwa 41) allotted 730 billion yen in construction bonds.[15] By 1990 (Heisei 2), the government did not issue a national bond due to the Japanese asset price bubble. Bonds were issued again in 1994 (Heisei 8), and has been issued every year since.

In 1995 (Heisei 9), Masayoshi Takemura, the former finance minister, declared the Declaration of Fiscal Crisis by issuing deficit-covering bond with higher frequency.[16]

National bond issuing and economic policy[edit]

During the Japanese asset price bubble of the late 1980s, revenues were high due to prosperous conditions, Japanese stocks profited, and the amount of national bonds issued was modest. With the breakdown of the economic bubble came a decrease in annual revenue. As a result, the amount of national bonds issued increased quickly. Most of the national bonds had a fixed interest rate, so the debt to GDP ratio increased as a consequence of the decrease in nominal GDP growth due to deflation.

The growth of annual revenue was slowed down by the prolonged depression.[17] Consequently, the governments started issuing additional national bonds to cover the interest payments. This national bond is called renewal national bond. As a result of issuing these bonds, the debt is not actually repaid, and the amount of bonds issued continued to grow. Japan has continued to issue bonds to cover the debt since the asset price bubble collapse.

There was the phase that opportunity to act austerity policy rose when the fear for return (repayment) principal of interest was close-upped at any trouble happened. But, the policy was acted, that was the inadequate fiscal action by the government and bring finance under control by the Bank of Japan, when critical recession caused by austerity policy and others. There was the opinion that suggested a fear for general situation of the economic structure, that the Japanese economy experienced deflation caused by globalization and the growing international competition.[18][19] These factors steered the direction of Japanese economic policy, hence, the perceived harmful impact to the economic strength of the country.

With the above-mentioned view point from the mobilizing of finances by the government or the action to monetary squeeze by the BOJ, or, from the view point that it has been deflation recession caused by long termed low demand, there are criticisms that it also cause an effect hurt power of economy the tend to promote structural reform  [jp] increase efficiency of supply side. On the other hand, there are following suggestions for that criticisms:

The direct guarantee of the national bond by the national central bank[edit]

A policy was planned and enacted in which the national central bank would directly buy the national bonds.

Economist Kazuhito Ikeo pointed out, "Both Quantitative easing and fiscal finance  [jp] are different from each other. We must not see that they are the same by inferring that "the Bank of Japan purchased a national bond". "To lend money" is clearly different than ""to give money."" However, it appears the same, as it is difficult to distinguish each when we only observe money transferring from place to place.[25]

The Fiscal Law[edit]

By the statute of the Fiscal Law of Japan, the Bank of Japan must not buy national bonds directly.[26] Nevertheless, according to the provision, it is allowed to buy when the National Diet approves the bill. These regulations result from reflection that the Bank of Japan brought about violent inflation by their public bond purchases during the period from before to just after the War.[27][28]

See also[edit]

External links[edit]

  • Japanese Government Bonds


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  3. ^ "Japan gov't debt hits record-high as social security costs balloon". Xinhua. February 9. Retrieved May 10, 2018. Check date values in: |date= (help)
  4. ^ Gurria, Angel. "Towards a positive legacy of a terrible crisis". OECD. Retrieved May 10, 2018.
  5. ^ Kan warns of Greece-like debt crisis
  6. ^
  7. ^
  8. ^ Asahi Shimbun UPDATE: Lower House passes bills to double consumption tax Archived 2013-06-22 at the Wayback Machine Retrieved on July 4, 2012
  9. ^ Daily Yomiuri website Lower house OK's tax hike bills / 57 DPJ lawmakers rebel against vote; Ozawa 'studying various options' Retrieved on July 4, 2012
  10. ^ The Japan Times, "Abe's consumption tax decision". Retrieved on August 28, 2016
  11. ^ a b c "Don't mention the debt". The Economist. 4 May 2013. Retrieved 7 January 2014.
  12. ^ a b Barley, Richard (18 February 2013). "Japan's Relentless Bonds". Wall Street Journal. Retrieved 7 January 2014.
  13. ^ Grimes, William (6 October 2011). "Japan's Debt Challenge". NBR. Retrieved 7 January 2014.
  14. ^ 真壁, 昭夫 (1 July 2014), "終戦直後のような預金封鎖は本当に起きるのか? 国民に浸透した「超財政悪化不安」の現実味と対策", ダイヤモンド・オンライン
  15. ^ 栗原, 昇 (2010). ダイヤモンド社 (ed.). 図解 わかる! 経済のしくみ (new ed.). ダイヤモンド社. p. 110).
  16. ^ "第51回滋賀中部政経文化懇話会 講師に武村正義氏", 滋賀報知新聞, 16 November 2011, archived from the original on 29 April 2014, retrieved 31 October 2017
  17. ^ 一般会計税収の推移
  18. ^ 野口, 旭 (30 June 2004), "野口旭の「ケイザイを斬る!」 第7回 改革批判の過去と現在", Hotwired Japan ALT BIZ[dead link]
  19. ^ 野口, 旭 (30 June 2004), "野口旭の「ケイザイを斬る!」 第8回 開かれた社会とその宿命", Hotwired Japan ALT BIZ[dead link]
  20. ^ Krugman, Paul (2000), "流動性のわなと日本のマクロ経済政策―問題提起", in 通商産業研究所編集委員会(編著) (ed.), マクロ経済政策の課題と争点 吉川洋, 東洋経済新報社
  21. ^ Krugman, Paul (2010-10-28), Friedman on Japan
  22. ^ 岩本, 康志 (2010-11-01), "岩本康志東京大学大学院経済学研究科教授 日銀は「財政政策に踏み込むな」", ダイヤモンドオンライン
  23. ^ 伊藤, 隆敏 (2011-02-02). "金融政策、財政は手遅れ FTA進め構造改革急げ". 週刊東洋経済 (臨時増刊 デフレ完全解明 ed.). 東洋経済新報社 (6306): 46.
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  25. ^ "財政ファイナンスをやってはいけない", 東洋経済オンライン, 5 December 2012
  26. ^ 財政法5条, すべて、公債の発行については、日本銀行にこれを引き受けさせ、又、借入金の借入については、日本銀行からこれを借り入れてはならない。但し、特別の事由がある場合において、国会の議決を経た金額の範囲内では、この限りではない。
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