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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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  • Kiichi Tokuoka, 2010. "The Outlook for Financing Japan's Public Debt," IMF Working Papers 2010/019, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2010/019
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    Cited by:

    1. Christian Dreger, 2017. "Long-term growth perspectives in Japan and the Euro area," Asia Europe Journal, Springer, vol. 15(4), pages 363-375, December.
    2. Christoph A. Schaltegger & Martin Weder, 2015. "Fiscal Adjustments and the Probability of Sovereign Default," Kyklos, Wiley Blackwell, vol. 68(1), pages 81-110, February.
    3. Gary Robinson, 2017. "Pragmatic financialisation: the role of the Japanese Post Office," New Political Economy, Taylor & Francis Journals, vol. 22(1), pages 61-75, January.
    4. Christoph A. Schaltegger & Martin Weder, 2013. "Will Europe Face A Lost Decade? A Comparison With Japan's Economic Crisis," CREMA Working Paper Series 2013-03, Center for Research in Economics, Management and the Arts (CREMA).
    5. Kiichi Tokuoka & Mr. Murtaza H Syed & Mr. Kenneth H Kang, 2009. "“Lost Decade” in Translation - What Japan’s Crisis could Portend about Recovery from the Great Recession," IMF Working Papers 2009/282, International Monetary Fund.
    6. Takeo Hoshi & Takatoshi Ito, 2013. "Is the Sky the Limit? Can Japanese Government Bonds Continue to Defy Gravity?," Asian Economic Policy Review, Japan Center for Economic Research, vol. 8(2), pages 218-247, December.
    7. Ichiue, Hibiki & Shimizu, Yuhei, 2015. "Determinants of long-term yields: A panel data analysis of major countries," Japan and the World Economy, Elsevier, vol. 34, pages 44-55.
    8. Christoph A. Schaltegger & Martin Weder, 2014. "Fiscal adjustment and the costs of public debt service: evidence from OECD countries," Applied Economics, Taylor & Francis Journals, vol. 46(22), pages 2593-2610, August.
    9. Mr. Jochen R. Andritzky, 2012. "Government Bonds and their Investors: What Are the Facts and Do they Matter?," IMF Working Papers 2012/158, International Monetary Fund.
    10. 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.
    11. Naoyuki Yoshino & Uwe Vollmer, 2014. "The sovereign debt crisis: why Greece, but not Japan?," Asia Europe Journal, Springer, vol. 12(3), pages 325-344, September.
    12. Laura Jaramillo & Ms. Yuanyan S Zhang, 2013. "Real Money Investors and Sovereign Bond Yields," IMF Working Papers 2013/254, International Monetary Fund.
    13. Mr. Waikei R Lam & Kiichi Tokuoka, 2011. "Assessing the Risks to the Japanese Government Bond (JGB) Market," IMF Working Papers 2011/292, International Monetary Fund.
    14. Tomomi Miyazaki & Kazuki Onji, 2017. "The Sustainability of Japan's Government Debt: A Review," Discussion Papers 1716, Graduate School of Economics, Kobe University.
    15. Ikuo Saito, 2016. "Fading Ricardian Equivalence in Ageing Japan," IMF Working Papers 2016/194, International Monetary Fund.
    16. 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.
    17. Ogawa, Kazuo & Imai, Kentaro, 2014. "Why do commercial banks hold government bonds? The case of Japan," Journal of the Japanese and International Economies, Elsevier, vol. 34(C), pages 201-216.

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