Morning commuters in front of the Bank of Japan headquarters in Tokyo, Japan, on Jan. 16, 2023.
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Japan’s funds have gotten increasingly precarious, Finance Minister Shunichi Suzuki warned on Monday, just as markets test whether the central bank can keep rates of interest ultra-low, allowing the federal government to service its debt.
Japan’s public debt is greater than double its annual economic output, by far the heaviest burden within the industrialized world.
The federal government has been helped by near-zero bond yields, but bond investors have recently sought to interrupt the Bank of Japan’s (BOJ) 0.5% cap on the 10-year bond yield, as inflation runs at 41-year highs, double the central bank’s 2% goal.
“Japan’s public funds have increased in severity to an unprecedented degree as we’ve got compiled supplementary budgets to answer the coronavirus and similar issues,” Suzuki said in a policy speech starting a session of parliament.
Suzuki reiterated the federal government’s aim to realize an annual budget surplus — excluding latest bond sales and debt-servicing costs — within the fiscal 12 months to March 2026. The federal government, nevertheless, has missed budget-balancing targets for a decade.
The Ministry of Finance estimates that each 1-percentage-point rise in rates of interest would boost debt service by 3.7 trillion yen ($29 billion) to 32.5 trillion yen ($251 billion) for the 2025/2026 fiscal 12 months.
“The federal government will strive to stably manage Japanese government bond (JGBs) issuance through close communication with the market,” he said.
“Overall JGB issuance, including rolling over bonds, remain at an especially high level price about 206 trillion yen ($1.6 trillion). We are going to step up efforts to maintain JGB issuance stable.”
“Public finance is the cornerstone of a rustic’s trust. We must secure fiscal space under normal circumstances to safeguard trust in Japan and other people’s livelihood at a time of emergency.”
