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News Navigator: Can Japan survive with more than $11 trillion in debt?

This photo shows the Bank of Japan headquarters building in Tokyo's Chuo Ward. (Mainichi/Tsuyoshi Goto)

The Mainichi Shimbun answers some common questions readers may have about Japan's increasing debt of more than 1.2 quadrillion yen (about $11 trillion) amid the new coronavirus pandemic.

    Question: Is it true that Japan's debt is increasing while battling the new coronavirus pandemic?

    Answer: In fiscal 2020 -- which ends in March 2021 -- the new coronavirus has wreaked havoc, so the Japanese government has compiled a supplementary budget as many as three times to support household economies and businesses, increasing its annual spending to 175 trillion yen -- a record high. Meanwhile, its revenue from tax has declined due to the recession, and the government has issued a huge amount of national bonds to cover the revenue drop.

    Q: How much worth of bonds has Japan issued?

    A: The amount has reached 112 trillion yen -- also a record high. The worst figure in the past was 52 trillion yen in fiscal 2009 after the global financial crisis caused by the bankruptcy of Lehman Brothers, but the amount this fiscal year is more than double that. The debt of the central and local governments is expected to surpass 1.2 quadrillion yen, or about 9.6 million yen (about $91,000) per capita, in the end of fiscal 2020, putting the economy in a crisis situation.

    Q: How can the country have such a huge amount of debt?

    A: Issuing national bonds means borrowing money from investors who buy them. The government has to return the money with interest under a repayment deadline, but if the amount of debt becomes too high, it will be difficult for the government to sell national bonds as many investors doubt if they can really get their money back. This mechanism works as an alert, and the national government tries to drive down debt. However, the central bank -- the Bank of Japan -- is buying a huge amount of bonds in the market now, which makes the situation look like the government can borrow unlimited money without any cause for concern.

    Q: Is Japan going to be OK?

    A: The movement of central banks buying national bonds that governments issued in huge amounts to respond to the coronavirus has spread worldwide. But central banks don't have unlimited money. If a government's debt becomes too huge and investors begin to think they won't get their money back, there will be concerns that the value of their currency will drop and prices will soar, bringing large-scale confusion to people's lives. Governments around the globe need to achieve "spending without waste" so that they don't leave debt to future generations.

    (Japanese original by Takayuki Hakamada, Business News Department)

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