The outstanding long-term debt of the central government is set to top ¥1 quadrillion ($9.12 trillion) at the end of March, according to officials, with its fiscal health rapidly worsening due to the need to finance measures against the coronavirus pandemic.
The debt, already the worst among developed countries, would average out to a burden of ¥8 million on each Japanese citizen.
The Finance Ministry officials have projected the total debt, excluding debt such as bonds to finance the government’s fiscal and investment programs, as well as bills for short-term funds, to reach ¥1.01 quadrillion.
The total, up ¥100 trillion from a year earlier, represents growth of 1.5 times in 10 years.
On Friday, the Diet enacted a record ¥106.61 trillion budget for fiscal 2021, above ¥100 trillion for the third consecutive year and setting a new record for the ninth straight year.
While annual tax revenues have continued to be around ¥60 trillion, it has been unavoidable for the government to issue a huge amount of bonds each year to finance growing social security and defense costs, in addition to coronavirus countermeasures.
Together with the combined outstanding long-term debt of local governments, Japan’s total is set to exceed ¥1.2 quadrillion, or around 220% of its gross domestic product.
With the need to continue issuing bonds, it will be almost impossible for the government to bring its primary balance — tax revenue minus expenses other than debt-servicing costs — into the black by fiscal 2025, its official target year for achieving a surplus.
“By analyzing cost effectiveness of social security programs and public works, the government should track down wasteful spending,” said Hideaki Tanaka, a finance professor at Meiji University.
“A sharp tax rise is difficult but there is room for increasing tax revenues by reviewing preferential treatment for industries,” he added.
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