The balance of long-term Japanese government debt surpassed 1,000 trillion yen ($7.7 trillion) for the first time in fiscal 2021 ended in March to reach its highest-ever level, the Finance Ministry said Tuesday.
The debt grew to 1,017.1 trillion yen, breaking records for the 18th consecutive year, on the back of swelling social security costs amid rapid aging of the population and emergency spending in response to the coronavirus pandemic.
The long-term debt balance, which excludes some types of bonds, increased 44 trillion yen from the previous year. The expansion of debt put the world's third-largest economy further away from restoring its fiscal health, already the worst among major economies.
The debt balance has doubled in the past 20 years, after topping 500 trillion yen for the first time at the end of fiscal 2002.
Together with an estimated 193 trillion yen of outstanding long-term debt at local governments, Japan's total debt is set to reach 1,210 trillion yen, according to the ministry.
By simple calculation, each Japanese citizen is burdened with 9.66 million yen in debt.
Growing interest payments on the accumulated debt following a recent uptrend in bond yields would be a headache for the government. But so far, the Bank of Japan has purchased a massive amount of bonds as part of its accommodative monetary policy to keep interest rates near zero.
Former Prime Minister Shinzo Abe, whose "Abenomics" economy-boosting program included bold monetary easing, called the BOJ "a subsidiary of the government," drawing an immediate backlash from opposition lawmakers who see the remark as undermining the independence of the central bank.
For fiscal 2022, the government plans to spend a record 107.60 trillion yen in the initial budget, partly to finance rising social security costs. While expecting tax revenues of about 65 trillion yen, it plans to issue bonds to help cover the shortfall.
The country's fiscal health may deteriorate further as the ruling Liberal Democratic Party and its junior coalition partner Komeito agreed in April to seek an extra budget of more than 2.5 trillion yen to help cushion the impact of surging energy and food prices spurred by Russia's invasion of Ukraine.
As of December, the BOJ owned 43 percent of total debt outstanding, though it draws a line from debt monetization and buys government bonds via the market.
"Half of the (government) debt is purchased by the BOJ. The BOJ is a subsidiary of the government," Abe, who still supports the BOJ's monetary easing, told a gathering on Monday.
When the repayment deadline for the debt comes, the government can roll it over, he said.
Takahide Kiuchi, an executive economist at the Nomura Research Institute and a former BOJ board member, said the central bank's independence has been and should be maintained, calling Abe's view "too unrefined."
"If the BOJ's independence is undermined, it will be forced to make policies only convenient for the government," Kiuchi said, warning that unlimited government bond issuance will raise the risk of fiscal collapse and hurt the value of the Japanese currency and economic growth potential.
