The Outlook For Financing Japans Public Debt

Download or read book The Outlook for Financing Japan's Public Debt written by Kiichi Tokuoka and published by International Monetary Fund. This book was released on 2010-01-01 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: Despite the rapid rise in public debt and large fiscal deficits, Japanese Government Bond (JGB) yields have remained fairly stable. Possible factors include: Japan's sizeable pool of household savings, presence of large and stable institutional investors, and strong home bias. These factors are likely to persist for some time, but going forward, the market's capacity to absorb debt is likely to diminish, as population aging reduces savings inflows and financial reforms enhance risk appetite. This could in turn strengthen the link between JGB yields and the stock of public debt. In light of these structural changes in the market, fiscal consolidation will be key for maintaining market stability.