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The Outlook for Financing Japan's Public Debt

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  • Kiichi Tokuoka

Abstract

Despite the rapid rise in public debt and large fiscal deficits, Japanese Government Bond (JGB) yields have remained fairly stable. Possible factors include: Japan''s sizeable pool of household savings, presence of large and stable institutional investors, and strong home bias. These factors are likely to persist for some time, but going forward, the market''s capacity to absorb debt is likely to diminish, as population aging reduces savings inflows and financial reforms enhance risk appetite. This could in turn strengthen the link between JGB yields and the stock of public debt. In light of these structural changes in the market, fiscal consolidation will be key for maintaining market stability.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/19.

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Length: 24
Date of creation: 01 Jan 2010
Date of revision:
Handle: RePEc:imf:imfwpa:10/19

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Keywords: Public debt; Aging; Budget deficits; Debt management; Financial sector; Fiscal consolidation; Private investment; Private savings; fiscal deficits; Japanese government bonds; yields; bond yield; primary deficit; financial assets; fiscal policy; government bond yields; stock of debt; deposit rate; fiscal variables; financial reforms; financial institutions; sovereign bonds; expansionary fiscal policy; bond issuances; fiscal forecasts; public finances; financial stability; fiscal sustainability; fiscal stimulus; government deficit; financial economics; financial market; fiscal discipline; bond markets; tax increase; debt service;

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Citations

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Cited by:
  1. Laura Jaramillo & Yuanyan Sophia Zhang, 2013. "Real Money Investors and Sovereign Bond Yields," IMF Working Papers 13/254, International Monetary Fund.
  2. Schaltegger, Christoph & Weder, Martin, 2013. "Fiscal Adjustments and the Probability of Sovereign Default," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79979, Verein für Socialpolitik / German Economic Association.
  3. Takeo Hoshi & Takatoshi Ito, 2012. "Defying Gravity: How Long Will Japanese Government Bond Prices Remain High?," NBER Working Papers 18287, National Bureau of Economic Research, Inc.
  4. Christoph A. Schaltegger & Martin Weder, 2010. "Fiscal Adjustment and the Costs of Public Debt Service: Evidence from OECD Countries," CREMA Working Paper Series 2010-08, Center for Research in Economics, Management and the Arts (CREMA).
  5. Raphael W. Lam & Kiichi Tokuoka, 2011. "Assessing the Risks to the Japanese Government Bond (JGB) Market," IMF Working Papers 11/292, International Monetary Fund.
  6. Zlatuse Komarkova & Vilma Dingova & Lubos Komarek, 2013. "Fiscal sustainability and financial stability," Occasional Publications - Chapters in Edited Volumes, in: CNB Financial Stability Report 2012/2013, chapter 0, pages 103-112 Czech National Bank, Research Department.
  7. Kiichi Tokuoka & Murtaza H. Syed & Kenneth Kang, 2009. "“Lost Decade†in Translation," IMF Working Papers 09/282, International Monetary Fund.
  8. Jochen R. Andritzky, 2012. "Government Bonds and their Investors," IMF Working Papers 12/158, International Monetary Fund.

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