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Japan’s government bonds expected to be 1.8 times GDP

  • December 24, 2021
  • , Jiji Press , 12:43 p.m.
  • English Press

Tokyo, Dec. 24 (Jiji Press)–The balance of ordinary Japanese government bonds is expected to come to 1,004 trillion yen at the end of fiscal 2021, surpassing the 1,000-trillion-yen mark, and reach 1,026 trillion yen a year later.

The figures would be 80 pct higher than Japan’s nominal gross domestic product.

The loosening of the country’s fiscal discipline, reflecting large-scale economic measures to deal with the novel coronavirus pandemic, is expected to impose burdens on future generations.

The outstanding JGB balance will be twice as high as that of the early 2000s, after the government has continued spending on a scale bigger than tax revenues amid rising social welfare costs caused by the aging population.

Adverse effects of deteriorating finances have mostly not become evident due to very low interest rates brought about by the Bank of Japan’s ultraeasy monetary policy.

Interest payments on JGBs, which stood at over 10 trillion a year in the 1990s, are now expected to stand at 8,247.2 billion yen in fiscal 2022, which starts in April, down 256.3 billion yen from the figure in the fiscal 2021 initial budget.

But there are concerns that public finances will be strained if interest rates rise in response to an increase in prices at a time when Japan is saddled with massive debt.

Takayuki Sueyoshi, an economist at Daiwa Institute of Research Ltd., warned that the country is susceptible to a hike in interest rates due to the need for frequent refinancing as a result of an increase in the issuance of short-term government securities amid the coronavirus crisis.

The Fiscal System Council, which advises the finance minister, said in a set of proposals this month that Japan cannot assume that the current situation, in which the central bank’s measures keep interest rates low, will continue forever.

Meanwhile, the Finance Ministry said Friday that it expects to issue 215,038 billion yen in JGBs in the fiscal 2022 draft budget, down from 236,008.2 billion yen planned in the fiscal 2021 initial budget.

It is the first time in three years for the planned amount of JGB issuance to decrease on an initial budget basis.

In fiscal 2022, the issuance amount of new JGBs, excluding refunding bonds, will fall by 6,671 billion yen to 36,926 billion yen.

The drop, the first in two years, comes as the government expects an increase in tax revenues on the back of a recovery in corporate earnings, which had been hit hard by the coronavirus crisis.

The new JGB issuance amount accounts for 34.3 pct of the government‘s general-account revenue in the fiscal 2022 draft budget, down 6.6 percentage points.

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