National debt of Japan

Main article: Economy of Japan

2024: Japan's 10-year government bond yield tops 1%

The yield on Japan's 10-year bonds in May 2024 exceeded 1% for the first time in 11 years, as investors expect an increase in borrowing costs due to the Central Bank's historic policy change.

2023

Public debt - $9.1 trillion or 261% of GDP, 98% nominated in yen

Data for September 2023

Japan's national debt in mid-2023 is approaching 1300 trillion yen, which is about $9.1 trillion. or 230% of GDP.

The increase in debt burden continues continuously, compared to 2019, an increase of 30 percentage points.

The basis for the sustainability of Japan's public debt is the structure of holders, where the Bank of Japan seized almost half of it, the remaining 30% is held by Japanese commercial banks, pension and insurance funds, which, in fact, represent quasi-state entities due to the specifics of the functioning of the Japanese financial system and statehood.

The second important stabilizing feature is the currency structure, where 98.7% is nominated in yen, which allows you to fully close the entire debt structure on the financial system of Japan, reducing dependence on the external environment.

Another 13.6% is held by non-residents, whose share tends to decline. In 2009, non-residents occupied almost a quarter of the debt, in 2015 - 17%, in 2019 - 15.5%.

The third stabilizing feature is low interest rates.

The duration of Japanese government bonds (JGBs) is skewed toward the long-term spectrum. This is a reflection of the Bank of Japan's quantitative easing (QE) program, which has been buying up large amounts of long-term JGBs in recent years.

Net placements outside the buyback of the Bank of Japan on short-term and medium-term debt took place at weighted average rates of only 0.09% and 0.18%, respectively, on average over the past three years.

All this will collectively stabilize the national debt in Japan. The interesting thing about all this is that Japan, unlike other Central Banks, managed to sit out an inflation storm with zero rates, Spydell Finance wrote.

Moreover, Japan continues to increase public debt, increasing investments in JGB by 30 trillion yen from the beginning of 2023 (main operations in January-May 2023).

Japan is the only country in the world trying to mimic the invention of the eternal motor.

Debt crisis and record money issue

At the beginning of 2023, Japan's debt is approaching 1,100 trillion yen. The debt burden is 230-240% of GDP - this is more than 115% in the United States and 97% in the Eurozone.

Half of the public debt is held by the Bank of Japan, 14-15% are affiliated with the state Japanese banks, 20% - insurance funds of Japan, about 7% - pension funds, 7% non-residents, 1.2% of households.

Japan's finsystem has been gutted just under in the last 25 years. Everything that could be driven into public debt has already been driven. At the same time, objectively insufficiently generated cash flow in the amount commensurate with the need to ensure financing of the budget deficit.

There are no external investors in Japanese debt, unlike the situation in the dollar and euro zones, which is closed to international capital. Japan is a "thing in itself."

Japan's record trade deficit led to a near-nullification of the current account, and a differential of rates in Japanese and foreign markets provokes capital outflows, which hit the yen in mid-2022, triggering the worst yen collapse in several decades.

In Japan, capital flight trends are being actualized in search of greater returns, with the generated flow through the current account surplus becoming insufficient (1% of GDP per year current versus 4% typical) to balance internal structural contradictions.

The Bank of Japan in January 2023 launched an unprecedented amount of QE. The printing press will be heated and randomly beaten with liquidity in all directions, the Spydell Finance channel noted. The Bank of Japan's balance sheet is growing, both through the redemption of government bonds of the Japanese government and through an increase in bank lending (earlier something worked one thing).

From January 1, 2023 to January 20, 2023, the Bank of Japan's assets grew by 23.4 trillion yen, the most significant increase since December 1999, when 27.2 trillion yen was charged in a month, but almost everything has been taken since January 2000.

This time, the increase in assets occurs within the framework of a consistent and agreed policy of closing cash flows into the internal circuit of the Central Bank, i.e., in fact, the nationalization of the entire financial system.

High debt burden and a specific debt structure prevent the Bank of Japan from raising rates, as this will accelerate the cost of servicing to unacceptable levels.

The actions of the Bank of Japan provoke an aggravation of imbalances and a debt crisis, as the gap between the current rate and inflation increases, which makes rates record negative for Japan.

Negative debt rates reset demand for new debt placements and trigger Japanese capital flight due to differential rates in Japan and foreign capital markets. This puts pressure on the yen and intensifies Japan's debt crisis.

An attempt to maintain/hold the 0.5% rate target forces the BOJ to redeem all debt, further driving the system into dependency and further increasing imbalances.

This is what Japan's debt crisis looks like.

2020: State debt 254% of GDP

2018: The world's highest public debt per capita - $90.3 thousand

At the end of 2018

2017

Public debt 238% of GDP

The ratio of public debt to the country's GDP, 2017

How Japan solves the problem of public debt

For 2017, everyone knows well that Japan is the leader in terms of public debt among all countries of the world. The ratio of public debt to GDP in Japan is 250%. The absolute amount of debt is 12.5 trillion dollars. Here's his dynamic in the last decade.

It is believed that having a deficit budget is not good. But the Japanese were the least strained and strained about this. They willingly financed and continue to finance the budget deficit through the placement of bonds. International financial institutions have constantly criticized and criticized them for this. In 2017, it suddenly suddenly turned out that there was no problem with public debt at all. Let's explain why now. But a bit of numbers first.

The federal budget in Japan is $830-850 billion in expenses. They issue bonds each year for $1.5 trillion. I.e. bond issue is twice the budget. Most of the bonds are used to refinance accumulated debt (see chart).

Black segments are bonds issued in order to refinance debt. Red segments are bonds issued to finance budget deficits. Gray segments are bonds issued in order to finance the deficit of the pension fund.

At the same time, Japan's budget deficit is 4.5% of GDP.

For comparison, the United States at this time has a budget deficit of 3.2% of GDP, the UK - 3% of GDP.

15.6% of all federal budget revenues in Japan go to pay only interest on government bonds. bonds. At the same time, the Bank of Japan holds 40% of the total debt of the Government of Japan. And the Bank of Japan returns back to the Government all interest payments on those bonds that it (the Bank of Japan) is holding. Well, that is, servicing the part of the debt that belongs to the Bank of Japan does not cost the Government anything. And 15.6% of budget revenues are spent on servicing other part of the state. debt - that state. debt that belongs to individuals and legal entities.

And in 2017, the Government of Japan, together with the Central Bank of Japan, decided to completely solve the problem of public debt. They agreed that the Central Bank of Japan will redeem from the market the national debt of Japan, owned by all other bondholders. Every year, debt will be redeemed for 700-800 billion dollars. The entire debt is expected to be repurchased by the Bank of Japan by 2026. Accordingly, by 2026, budget expenditures on servicing government debt will fall to zero. I.e. The Central Bank of Japan will pay to the Government of Japan in the form of profit the same amount that the Government of Japan must pay to the Central Bank of Japan in the form of interest on bonds. This is a normal practice when the Central Bank pays part of its profits to the Government. (The Central Bank of Russia, for example, deducts 75% of profits to the Government of the Russian Federation.).

That's how it's not difficult. Of course, the redemption of debt for 700-800 billion dollars per year means an issue for the same amount. But inflation in Japan is now 0.02%, that is, inflation is zero. So it is not difficult to pursue a soft monetary policy. And even if inflation suddenly jumps, it will not change anything, because there are a million ways to sterilize excess money supply.

In principle, the United States can do the same with its public debt. To do this, they will have to issue $11.5 trillion. Well, that is, about a third more than the Japanese. As we remember during the QE1-QE3, the Fed issued 3.6 trillion dollars and 90% of this money never got into the economy, remaining in the offset accounts of banks in the Fed (more here). So issuing 11.5 trillion dollars will not be difficult either. If necessary. So far, apparently not needed.

See also

• US National Debt