Legal Framework for Government Debt Management Policy in Japan

This paper examines issues surrounding the design of legal frameworks for government debt management policy. Government debt management policy here refers to the strategy to implement the optimal structure of government debt under a given size of debt stock, and critically a reasonable legal framework is a prerequisite for such debt management policy to function well. First, the paper reviews the recent developments over the legal frameworks for government debt management policy and points out four legal design issues: (i) allocation of the authority to issue government bonds; (ii) clarification of the relationship between debt management policy and other relevant policies (monetary policy in particular); (iii) the authorities and organization of the debt management organization; and (iv) the transparency and accountability of debt management policy. Second, drawing on the international and comparative perspectives, this paper uncovers some characteristics of Japan’s legal framework for government debt management policy, such as extensive involvement of the Diet (parliament) with the debt issuance and redemption, as well as the (comparatively rare) existence of sinking funds. It is also noted that the design for the legal framework of government debt management policy is closely intertwined with Japan’s budgetary law institution.