Japan's debt reached a record 1,286.45 trillion yen ($8.6 trillion) at the end of 2023, government data showed Friday, reflecting its heavy reliance on borrowing to meet spending needs to fight the COVID-19 pandemic and rising prices.

The debt, more than twice the size of the Japanese economy, increased 29.45 trillion yen from December 2022. The world's third-largest economy continues to face an urgent need to restore its fiscal health, the worst among developed countries.

The debt includes government bonds, borrowing and financing bills.

Japan has seen growth in tax revenue in recent years, but it has been far exceeded by spending.

The government aims to reduce fiscal expenditures, which increased significantly during the pandemic and ongoing cost-of-living crisis, to pre-emergency levels. However, the state budget for fiscal 2024, starting from April, remains the second-largest on record at 112.57 trillion yen.

After years of keeping borrowing costs at rock-bottom levels to support households and businesses, the Bank of Japan is seen as gradually moving away from its ultraloose monetary policy. The shift would increase debt-servicing costs for Japan.

As of Dec. 31, the total debt consisted of 1,146.06 trillion yen in government bonds, 48.09 trillion yen in borrowing, and 92.30 trillion yen in financing bills, the Finance Ministry data showed.

Japan's gross domestic product was roughly 600 trillion yen in nominal terms, according to the government's data currently available for the July-September quarter.

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