IMF Staff Country Reports

Japan: Selected Issues

Publication Date:

August 5, 2013

Electronic Access:

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Summary:

This Selected Issues paper examines implications for long-term bond yields in case of Japan. The analysis finds that so far, upward pressure on interest rates from high public debt has been offset by domestic factors, including a stable investor base with a preference for safe assets. As these effects could decline with population aging, yields could rise unless reforms are implemented to stimulate growth and reduce the public debt-to-GDP ratio. In such a scenario, long-term Japanese government bond rates would remain relatively low and stable. The paper also analyzes to what extent rising health care spending poses a fiscal risk to Japan’s economy.

Series:

Country Report No. 2013/254

Subject:

Aging Banking Employment protection Financial services Labor Labor markets Long term interest rates Population and demographics Public debt