The Japanese government bond issuance reaches record high
According to the Japanese government's draft budget
for fiscal 2020, determined at the end of last year, the amount of government
debt issuance will reach a record high.
The total expenditure was 102.7 trillion yen, also a record high, exceeding 100 trillion yen for the second consecutive year.
Although tax revenues are expected to increase due to the consumption tax hike implemented last October, the government has to continue increasing bond issuance because expenditures exceed revenues next year again, highlighting difficulties of the fiscal reform Japan must face for long time future.
The total public debt was announced to be 1,103.4 trillion yen as of the end of March 2019, also the largest ever.
This is about 200% of Japan’s GDP and controlling expenditures is an imminent issue for the Japanese government.
Despite its overwhelming debt and huge budget deficit, Japan maintains low interest rates and low inflation for years which has been a conundrum to investors.
The reason Japan's finances have not collapsed is that most of the government bonds have been owned domestically, so even if foreign investors sell the bonds, the impact can be contained small. In other words, the government debt is supported by household financial assets which finance bond buyers.
However, the ratio of outstanding government debt to households’ assets is growing steadily because the growth rate of the government debt has been larger than that of household’s assets and Japan's fiscal situation continues to deteriorate.
In Japan, the population is aging rapidly, and if the social security expenditure increases, the budget deficit will further expand.
That is why it is necessary to expedite financial and social security reforms in anticipation of various difficulties to come.
The total expenditure was 102.7 trillion yen, also a record high, exceeding 100 trillion yen for the second consecutive year.
Although tax revenues are expected to increase due to the consumption tax hike implemented last October, the government has to continue increasing bond issuance because expenditures exceed revenues next year again, highlighting difficulties of the fiscal reform Japan must face for long time future.
The total public debt was announced to be 1,103.4 trillion yen as of the end of March 2019, also the largest ever.
This is about 200% of Japan’s GDP and controlling expenditures is an imminent issue for the Japanese government.
Despite its overwhelming debt and huge budget deficit, Japan maintains low interest rates and low inflation for years which has been a conundrum to investors.
The reason Japan's finances have not collapsed is that most of the government bonds have been owned domestically, so even if foreign investors sell the bonds, the impact can be contained small. In other words, the government debt is supported by household financial assets which finance bond buyers.
However, the ratio of outstanding government debt to households’ assets is growing steadily because the growth rate of the government debt has been larger than that of household’s assets and Japan's fiscal situation continues to deteriorate.
In Japan, the population is aging rapidly, and if the social security expenditure increases, the budget deficit will further expand.
That is why it is necessary to expedite financial and social security reforms in anticipation of various difficulties to come.
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