The Japanese public debt exceeded one quadrillion yen (US$10.46 trillion) in 2013, more than twice the annual gross domestic product of Japan.
In August 2011, Moody's rating 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 and followed by earthquake and tsunami in March 2011 contributed to the ratings downgrade. In 2012 the Organization for Economic Cooperation and Development (OECD) Yearbook editorial (Gurría 2012) stated that Japan's debt "rose above 200% of GDP partly as a consequence of the tragic earthquake and the related reconstruction efforts. Former Prime Minister Naoto Kan called the situation "urgent". Japan had the world's highest debt per GDP in 2014.
In order to address the Japanese budget gap and growing national debt, in June 2012 the Japanese National Diet, at the urging of Prime Minister Yoshihiko Noda of the Democratic Party of Japan, passed a bill to double the national consumption tax to 10%. The new bill increased the tax to 8% in April 2014. Although it was originally scheduled to raise the tax to 10% in October 2015, this has been subsequently delayed until at least October 2019. The goal of this increase was to halt the growth of the public debt by 2015, although reducing the debt would require further measures. The DPJ subsequently lost control of the Diet in late 2012, and Noda's successor Shinzo Abe, of the Liberal Democratic Party, implemented the "Abenomics" program, which involved an additional 10.3 trillion yen of economic stimulus spending to balance out the negative impact of the consumption tax increase on economic growth.
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. 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 market and reduces their sensitivity to credit rating changes. Betting against Japanese government bonds has become known as the "widowmaker trade" due to their price resilience despite fundamentals to the contrary.
Notwithstanding the stability of the market for Japanese government debt, the cost of servicing Japan's public debt uses up half of the state's tax revenues, and the cost of importing energy in the wake of the 2011 Fukushima disaster has also negatively impacted Japan's longstanding current account surplus.
Video National debt of Japan
History
In 1944 (Sh?wa 19), during the Pacific War, the amount of governmental debt exceeded 260% of domestic income .
In Japan, the government enacted the Public Finance Law (of Japan) by reflection that the amount of issued national bonds exceeded the revenue in 1947 (Sh?wa 22) in disorder period after war (of Japan) and it caused inflation after the war, and had take the principle of balanced fiscal policy by prohibit to issue the deficit-covering bond (of Japan) and the Bank of Japan from buying off the deficit-covering bond. Since the establishment of the 1955 System, the amount of held valuable securities in the bank, and especially national bonds, had risen significantly. However, the 1965 budget (Sh?wa 40) issued 259 billion yen in deficit-covering bonds, and the next year's budget in 1966 (Sh?wa 41) allotted 730 billion yen in construction bonds. In 1990 (Heisei 2), the government did not issue a national bond due to the Japanese asset price bubble make to increase the revenue, but issued it again in 1994 (Heisei 8), and has been issued every year since.
In 1995 (Heisei 9), Masayoshi Takemura, former finance minister, declared the Declaration of Fiscal Crisis by issuing deficit-covering bond more increasingly.
Maps National debt of Japan
The national bond issuing and the economic policy
During the Japanese asset price bubble of the late 1980s, revenues were high due to the prosperous conditions, Japanese stocks profited, and the amount of national bonds issued was modest. With the breakdown of the bubble economy came a decrease in annual revenue. As a result, the amount of national bonds issued increased quickly. Most of the national bonds had a fixed interest rate, so the debt to GDP ratio increased as a consequence of the decrease in nominal GDP growth due to deflation.
The growth of annual revenue was slowed down by the prolonged depression. Consequently, the governments started issuing additional national bonds to cover the interest repayments. This national bond is called renewal national bond as compared with new national bond. As a result of issuing these bonds, the debt is not actually repaid, and the amount of bonds issued continues to grow. Japan has continued to issue bonds to cover the debt since the asset price bubble collapse.
There was the phase that opportunity to act austerity policy rose, when the fear for return (repayment) principal of interest was close-upped at any trouble happened. But, the policy was acted, that was the inadequate fiscal action by the government and bring finance under control by the Bank of Japan, when critical recession caused by austerity policy and others. There is the opinion suggest a fear for general situation of the economic structure, that the Japanese economy became deflation by the globalization and growing competition more intense. By those reasons, it swing that the direction of economic policy of Japan, and so it very harm the ability of economy of Japan.
With the above-mentioned view point from the mobilizing of finances by the government or the action to monetary squeeze by the BOJ, or, from the view point that it has been deflation recession caused by long termed low demand, there are criticisms that it also cause an effect hurt power of economy the tend to promote structural reform increase efficiency of supply side. On the other hand, there are following suggestions for that criticisms:
- Paul Krugman suggested, that the opportunity cost of investment has been greater than the ROI, and that the quantitative easing policy has not been effective by falling into a liquidity trap caused by neglecting the generation of a expecting of inflation.
- Yasushi Iwamoto , economist suggested, the issue of decline of potential growth rate , and that it has been beyond the ability of monetary policy.
- Takatoshi Ito and Motoshige Ito , both economist suggested necessity of structural reform to recover the status enable to act an effect of the monetary policy.
The direct guarantee of the national bond by the national central bank
A policy was planned and enacted in the past that the national central bank would take up the national bond directly.
Kazuhito Ikeo , an economist pointed out, that "Both Quantitative easing and fiscal finance are different essentially each other. We must not see that they are as same, by pick up that ""the Bank of Japan purchase a national bond "". ""To lent a money"" is clearly different ""to give a money"". However, it appears the same as it is difficult to distinguish each of them when we only observe a money transferring phase.
The Fiscal Law
By the article of the Fiscal Law of Japan, the Bank of Japan must not buy a national bond directly. Nevertheless, according to the proviso, it is enable when the National Diet approve the bill allow to buy. These regulations result from reflection to that the Bank of Japan had made the violent inflation by their public bond buying during the period from before to just after the War.
See also
- Monetary and fiscal policy of Japan
- Japanese financial issue
- (The annual amount of repayment of official bonds of Japan)Proper Account of National Bond Settlement Fund (of Japan)
- List of countries by public debt
- Net international investment position
External links
- Japanese Government Bonds
References
Source of the article : Wikipedia
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