Japan’s debt time bomb to complicate BOJ exit path

TOKYO, Feb 11 (brecorder.com) - Japan’s ticking debt time bomb will likely complicate the next central bank governor’s task of steering a smooth exit from ultra-loose monetary settings, with rising long-term interest rates already forcing policymakers to amend budget projections.

A flurry of big spending packages and ballooning social welfare costs for a rapidly ageing population have left Japan with a debt pile 263% the size of its economy, double the ratio for the United States and the highest among major economies.

As a result, Japan spent 22% of its annual budget on debt redemption and interest payment last year, more than 15% on public works, education and defense combined.

The ratio could hit 25% in fiscal 2025 under new estimates that reflect recent rises in long-term interest rates, according to the government’s projections issued in January.

And yet, the government’s spending wish list keeps getting longer with Kishida announcing plans to boost Japan’s defense spending and payouts to family with children. ...continue reading