Azernews.Az

By Alimat Aliyeva

As of the end of 2024, Japan's public debt has reached its highest level in history, totaling nearly 1,317.64 trillion yen (around $8.7 trillion at the current exchange rate), Azernews reports.

The debt has increased by 31.8 trillion yen (over $205 billion) compared to the end of 2023. According to the Kyodo news agency, the current Japanese government is unlikely to reduce this debt in the near future, as it lacks a majority in the lower house of parliament to approve the state budget and faces pressure from the opposition. The opposition is calling for lower taxes and higher spending, particularly on education, which complicates efforts to address the fiscal situation.

Japan's budget deficit for the current fiscal year (April 2024–March 2025) stands at 34.95 trillion yen (nearly $230 billion), which is being financed through the issuance of government bonds. While the amount of new bonds issued has been decreasing over the past three years, Japan's budget remains heavily dependent on debt, with approximately 30% of government revenue coming from debt obligations. The national debt now exceeds the country’s GDP by more than two times, a significant concern for long-term fiscal stability.

However, the vast majority of Japan's government bonds are held by domestic legal entities and individuals, which helps mitigate the risk of a default. This domestic ownership means Japan is less vulnerable to external market fluctuations and foreign creditors. Despite this, the country faces an ongoing challenge in managing its public debt amid an aging population, low economic growth, and increasing social welfare costs.

Japan's debt situation underscores the broader challenges facing many developed economies, particularly as they grapple with demographic shifts and the rising costs of social programs. The country’s reliance on government bonds to finance its deficit could also limit its ability to implement necessary fiscal reforms in the future. As Japan continues to navigate this complex fiscal landscape, its ability to balance debt management with economic growth will be a critical factor in ensuring long-term financial stability.