IMF warns of higher debt-GDP ratio in Japan


The International Monetary Fund warned Wednesday that the ratio of Japan’s government debts to its gross domestic product is expected to rise to 250 percent by 2020 if the country maintains its current fiscal policy.

In its latest Fiscal Monitor report, the IMF also revised up its near-term projections for Japan’s debt-to-GDP ratio, to 246.1 percent in 2015 and 247.0 percent in 2016, up by 0.7 percentage point and 3.1 points, respectively, from the previous predictions made in October.

Those predictions took into account Japan’s decision last autumn to postpone an additional consumption tax hike to April 2017 and the October 2014 launch of additional monetary easing steps.

The IMF cited lower growth and continuing low inflation as fiscal risks “particularly daunting in the near term” for Japan as well as the eurozone.

“A spiral of entrenched sluggish growth, protracted undershooting from the inflation target, and constraints on monetary policy at the zero lower bound for nominal interest rates would have serious implications for public finances, with the possibility of continuously growing debt ratios,” it said.