According to an article published in the Wall Street Journal today,Japan’s central-government debt topped the quadrillion-yen mark for the first time ever in the second quarter.
The central government’s outstanding liabilities totaled ¥1.009 quadrillion ($10.44 trillion) at the end of June, up from Y991.601 trillion three months earlier.
The central government’s outstanding liabilities totaled ¥1.009 quadrillion ($10.44 trillion) at the end of June, up from Y991.601 trillion three months earlier.
The figure is more than 200% of what Japan’s economy, the world’s third-largest, produces per year. That’s by far the highest debt load among industrialized economies.
Add some ¥200 trillion of outstanding long-term municipal debt and the ratio jumps to 250%.
Still, the data may help Prime Minister Shinzo Abe to follow through with a plan to raise the consumption tax.
“Given that the fiscal deficit is running high and government debt outstanding has already reached extremely high levels, it’s quite important for the government to show a clear path toward fiscal consolidation, and implement it,” Bank of Japan Gov. Haruhiko Kuroda said Thursday.
The debate over the plan to raise the 5% sales tax to 8% in April and 10% in October 2015 has intensified recently as two of Mr. Abe’s economic advisors say the hike should be phased in more slowly to cushion any blow to growth and let the recovery take root.
The Japanese central bank, Finance Ministry and International Monetary Fund are trying to refute the arguments for delaying the planned tax hikes. Mr. Kuroda said Japan’s recovery is solid enough to take tax hikes in stride.
Unnerving tax-hike proponents is the fact that Mr. Abe belongs to a group of so-called “reflationists,” whose want to rely mainly on monetary easing to revive Japan’s deflating economy. Many of them prefer to rely more on growth than on tax hikes to fix government finances.
Backers and critics of the tax plan are closely watching initial estimates for Japan’s April-June quarter gross domestic product, out Monday morning. Mr. Abe has said that data point will be key in deciding whether he will push the tax rate higher next year.
Source: WSJ
