Weighing Up The Fiscal Scenarios


Weighing Up The Fiscal Scenarios

BMI View: There are few good options available to the Japanese government to address its ballooning debt load, but we believe that debt monetisation could prove to be the most costly in terms of its medium-term economic impact. The government could find itself facing high inflation, stagnating economic activity, and rising pressure on bond yields if current policies persist. We maintain our bearish view on local assets given these growing risks.

Japan's roughly 230% of GDP debt load is a major problem, which although widely acknowledged, is perhaps underappreciated. An even greater concern is the way in which the government and the Bank of Japan (BoJ) are looking to bring the debt load back to sustainable levels. In this article we will delve deeper into how Japan's indebtedness came about, the likely methods that the government will choose to bring down its debt level, and the economic and financial market implications of these policies.

Spending Has Remained Below That Of Its Peers…
Consolidated Government Spending, % of GDP

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Related sectors of this article: Economy, Fiscal Policy
Geography: Japan