Japan public debt hits record high

TOKYO: Japan’s government debt hit a record high of more than 10 trillion dollars as of the end of June, the Finance Ministry said Tuesday. The total public debt stood at 904.08 trillion yen ($10.55 trillion), up 21.15 trillion yen from the end of March, the ministry said in a report. According to the quarterly report, 733.81 trillion yen, or 81.2%, of the total accounted for government bonds.

“It is the highest figure for the government’s outstanding balance,” a ministry official said. Per-capita debt came to around 7.1 million yen ($83,000) as the ministry estimated the total is likely to reach about 973 trillion yen by March 31 next year, Kyodo News reported.

Prime Minister Naoto Kan’s government has sought to balance Japan’s fragile recovery with an agenda that aims to cut the industrialised world’s biggest public debt, which is at around 200% of gross domestic product.

The debt is a legacy of massive stimulus spending during the economic “lost decade” of the 1990s, as well as a series of pump-priming packages to tackle the recession which began in 2008. It crawled out of a severe year-long recession in 2009, but high public debt as well as deflation and weak domestic demand are hindering Japan.

Japan has faced global pressure to do more to cut its debt in recent months, although with around 95% of government bonds held by domestic investors, Japan’s risk of default is seen to be much lower than some eurozone countries.

After becoming Prime Minister in June, Kan unveiled fiscal reform plans to cap government spending and bond issuance in a bid to eventually reign in the debt mountain. He also raised the possibility of doubling Japan’s five percent consumption tax to help debt reduction efforts. But he suffered a defeat in July’s upper house elections which was blamed on the timing of his tax-rise discussion, and has cooled on the issue ever since.

Ratings agency Standard & Poor’s warned in July it might lower Japan’s credit rating if Tokyo fails to implement “meaningful” fiscal reform plans, after the election setback for Kan raised the spectre of policy gridlock. Koriki Jojima, a senior figure of Kan’s Democratic Party of Japan, has told a television interview that his party was ready to begin tax talks with the opposition camp, saying: “We want to speed up preparation so that we can start our debate at least by the year-end.”