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The Outlook for Financing Japan’s Public Debt

Author/Editor: Tokuoka, Kiichi
Authorized for Distribution: January 1, 2010
Electronic Access: Free Full Text (PDF file size is 1,124KB)
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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.
 
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Series: Working Paper No. 10/19
Subject(s): Public debt | Aging | Budget deficits | Debt management | Financial sector | Fiscal consolidation | Private investment | Private savings
Author's keyword(s): Public debt | fiscal deficits | Japanese government bonds | yields
 
English  
    Published:   January 1, 2010        
    ISBN/ISSN:   9781451962260   Format:   Paper
    Stock No:   WPIEA2010019   Pages:   120
    Price:   US$18.00
       
     
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