Markets are now testing whether the central bank can keep interest rates ultra-low so the government can repay its debt.

(Bloomberg)

[Financial Channel/Comprehensive Report] Japanese Finance Minister Jun Suzuki warned on Monday (23rd) that as the government prepares a supplementary budget to deal with issues such as the epidemic, Japan's public finances have become unprecedentedly severe.

According to comprehensive media reports, Suzuki Junichi said that the government's goal is to achieve a budget surplus by the fiscal year in March 2026, which does not include new bond sales and debt service costs. However, Japan has failed to achieve the budget balance target for decades. .

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In addition, Japan's public debt is more than 2 times annual economic output, by far the most burdened among industrialized countries, and although Japan has been helped by bond yields close to 0, Japanese inflation has reached a 41-year high Therefore, bond investors have recently tried to break through the Bank of Japan's 0.5% cap on 10-year government bond yields.

The Ministry of Finance of Japan estimates that for every 1 percentage point increase in interest rates, debt repayment in the 2025/2026 fiscal year will increase by 3.7 trillion yen (NT$856.5 billion) to 32.5 trillion yen (NT$7.5 trillion).

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