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Japan’s debt pile grows as government bonds hit record $7tn

THE NIKKEI via scoutAsia

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November 14, 2022 2 min read
Japan’s debt pile grows as government bonds hit record $7tn

A measure of Japan's government debt reached a record-high level of nearly 994 trillion yen ($6.8 trillion) in September, as spending growth outstripped economic expansion.

Outstanding general government bonds, which include borrowing to fund public works or cover deficits, jumped 9.46 trillion yen from three months earlier, according to Ministry of Finance data released on Thursday.

The rise adds to what is the biggest debt pile relative to economic size in the Group of Seven rich nations. Any rise in interest rates -- now crushed to near zero by the Bank of Japan -- would swell the government's debt servicing costs.

When including other types of bonds and borrowing, Japan's debt reached 1,251.38 trillion yen. Based on the country's estimated population of 124.83 million as of Oct. 1, this amounts to about 10 million yen, or $68,500, in debt per person.

More debt is set to be added on. Japan has not yet reached its general bond issuance cap for fiscal 2022, and the cabinet just approved a proposal for a second supplementary budget of 29 trillion yen for this fiscal year. Outstanding general bond debt is expected to reach 1,042.4 trillion yen at the end of the fiscal year in March.

With general government debt equivalent to 262.5% of its gross domestic product in 2021, Japan has the highest debt-to-GDP ratio in the G-7, according to data from the International Monetary Fund. By this measure, Japan is far out in front of the U.S. at 128.1%, the U.K. at 95.3% and Germany at 69.6%. The G-7 group also includes Canada, France and Italy.

GDP shrank in all of the G-7 countries in 2020 as the coronavirus pandemic struck, prompting governments to spend heavily to support businesses and consumers. But as economic activity began picking up in many parts of the world, debt-to-GDP ratios improved for all of the G-7 members except for Germany and Japan in 2021.

The BOJ is the biggest force in Japan's bond market. With the aim of keeping long-term interest rates no higher than around 0.25%, the central bank has been ramping up purchases of government bonds. It owned a record 51.3% of long-term government bonds with holdings of 536.6 trillion yen as of the end of October.

Fighting upward pressure on interest rates from the U.S. and Europe, the BOJ bought 12.5 trillion yen worth of bonds in October, its second-largest amount ever.

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The English translations provided through this service are the result of automatic and mechanical translation of contents written in Japanese and created by Nikkei or licensed by a third party, by an automatic translation system provided by a third party after certain processing of the contents by Nikkei. Nikkei disclaims all warranties, express or implied, related to the English translations, including any warranty of accuracy, reliability, validity and fitness for a particular purpose. Users shall use this service with the full understanding that it employs an automatic translation system that automatically and mechanically recognizes and analyzes information and outputs the results.