Japan’s financial problems are getting out of control
2023.01.23 02:51
Japan’s financial problems are getting out of control
By Kristina Sobol
Budrigannews.com – On Monday, Finance Minister Shunichi Suzuki issued a warning that Japan’s finances are becoming increasingly unstable. This comes as markets test the central bank’s ability to maintain extremely low interest rates while still allowing the government to service its debt.
The burden of Japan’s public debt is by far the greatest among industrialized nations, exceeding its annual economic output by more than double.
Bond investors have recently attempted to break the Bank of Japan’s (BOJ) 0.5% cap on the 10-year bond yield, despite the fact that inflation is at 41-year highs, double the central bank’s 2% target. This has been beneficial to the government.
In a policy speech that kicked off a session of parliament, Suzuki stated, “Japan’s public finances have increased in severity to an unprecedented degree as we have compiled supplementary budgets to respond to the coronavirus and similar issues.”
Suzuki reiterated the government’s goal of having an annual budget surplus in the fiscal year ending March 2026, excluding costs associated with debt-servicing and new bond sales. However, for a decade, the government has failed to achieve its budget-balancing goals.
For the fiscal years 2025 and 2026, debt service would rise by 3.7 trillion yen ($29 billion) for every one percentage point increase in interest rates, according to the Ministry of Finance.
He stated, “The government will strive to stably manage the issuance of Japanese government bonds (JGBs) through close market communication.”
“Overall JGB issuance, including rolling over bonds, remains extremely high,” worth approximately $1.6 trillion. We will intensify our efforts to maintain stable JGB issuance.”
“A nation’s trust is built on the foundation of public finance. To maintain people’s faith in Japan and their means of subsistence in an emergency, we must create fiscal room in normal circumstances.”
Suzuki’s determination to tackle fiscal reform and revive the economy was echoed by Prime Minister Fumio Kishida. He emphasized the necessity of a positive growth cycle driven by private consumption and corporate profits, which make up more than half of the economy.
In his policy speech, Kishida stated, “Wage hikes hold the key to this virtuous cycle.” He promised to push for labor reform in order to establish a framework that would enable long-term wage growth and alleviate the pain of rising living costs.
Kishida continued, “First of all, we need to realize wage growth that exceeds price increases.” He also promised to increase support for childcare and push for investment and reform in green and digital transformation.
