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Content: In 2013, the Japanese public debtexceeded one quadrillion yen(US$10.46 trillion), which was about twice the country's annual gross domestic productat the time. [ 1][2]
By 2015, the figure rose to US$11.06 trillion. This figure started to dip as the country adopted key economic initiatives, and the debt stood at US$9.94 trillion by the end of December 2017. [ 3]
In August 2011, Moody'srating cut 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, 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]Former Prime Minister Naoto Kancalled the situation "urgent" due to the ballooning debt.[5] By 2014, Japan had the world's highest debt-to-GDP ratio. [ 6][7]
In 2019, Japan's debt reached 223% of GDP. [ 8]
Contents
1Addressing public debt
2History
3National bond issuing and economic policy
3.1Direct purchase of government bonds by Bank of Japan
3.1.1The Public Finance Act
4See also
5External links
6References
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 Nodaof the Democratic Party of Japan(DPJ), passed a bill in June 2012 to double the national consumption taxto 10%.[9] This increased the tax to 8% in April 2014.[10] The originally scheduled 10% tax increase to be implemented in October 2015 was delayed until at least October 2019.[11] The final increase to 10% was implemented on October 1, 2019.[12] The goal of this increase was to halt the growth of the public debt by 2015, although reducing the debt would require further measures.[13] The DPJ subsequently lost control of the Diet in late 2012, and Noda's successor Shinzo Abeof the Liberal Democratic Partyimplemented the "Abenomics" program, which involved an additional 10.3 trillion yen of economic stimulusspending to balance out the negative impact of the consumption tax increase on economic growth. [ 13]
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.[14] Around 70% of Japanese government bonds are purchased by the Bank of Japan, and much of the remainder is purchased by Japanese banks and trust funds, which largely insulates the prices and yields of such bonds from the effects of the global bond marketand reduces their sensitivity to credit rating changes.[15] Betting against Japanese government bonds has become known as the "widowmaker trade" due to their price resilience even if fundamental analysisindicates the contrary should be true. [