Japan's National Debt Hits Record High, Expected to Exceed 13 Trillion Yen by Year-End

Japan's national debt has surged to a record high, reaching 1,346.68 trillion yen (approximately 11,970 trillion won) by the end of June, according to the Ministry of Finance. This figure represents an increase of 2.84 trillion yen from the previous quarter. The primary driver of this debt accumulation is the continued reliance on issuing government bonds to cover the gap between government spending and revenue.

The situation is expected to worsen, with projections indicating that the national debt will surpass 1,492.8 trillion yen (approximately 13,270 trillion won) by the end of 2026. This forecast is influenced by the government's fiscal plans, including the proposed reduction of the consumption tax rate on food items to a "real zero" by providing subsidies. While Prime Minister Sanae Takaichi has stated that the approximately 5 trillion yen needed for this measure will not be financed by deficit-covering bonds, financial markets remain wary.

Concerns are mounting over the Takaichi cabinet's expansionary fiscal policies. The Nikkei newspaper noted that the government's continuous fiscal operations, funded by debt, are a cause for worry. The potential for rising long-term interest rates looms as a risk associated with these policies.

Furthermore, future fiscal demands, such as the review of defense spending, add to the uncertainty. The ability of the government to control its national debt will be a critical factor in maintaining market confidence. The sustained increase in debt highlights ongoing challenges in balancing fiscal sustainability with economic stimulus measures.

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Concerns about the Takaichi cabinet's expansionary fiscal policy are emerging in the market.