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The Outlook for Financing Japan's Public Debt

  • Kiichi Tokuoka

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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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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