The Outlook for Financing Japan's Public Debt

Author/Editor:

Kiichi Tokuoka

Publication Date:

January 1, 2010

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 10/19

Subject:

English

Publication Date:

January 1, 2010

ISBN/ISSN:

9781451962260/1018-5941

Stock No:

WPIEA2010019

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

24

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