Borrowing to drive Japan’s debt over 1,100 trillion yen for first time -draft By Reuters

By Takaya Yamaguchi

TOKYO (Reuters) – Japan’s government debt will top 1.1 trillion yen ($8.47 trillion) for the first time by the fiscal year end in March 2027 as the country remains heavily dependent on borrowing, a draft estimate seen by Reuters showed. on Thursday

Even assuming a rosy scenario in which the world’s third-largest economy grows 3% a year in nominal terms, the debt will continue to grow to just under 1,200 trillion yen at the end of the forecast period ending in March 2033, it showed.

The assessment highlights Japan’s dire fiscal condition, which is expected to worsen as Prime Minister Fumio Kishida’s administration plans large increases in defense spending.

In annual policy consultations with Japan, the International Monetary Fund (IMF) on Thursday urged the government to put its fiscal house in order by raising taxes and cutting spending.

“Our overall message is that any increase in spending must be met with an increase in revenue. This is important given Japan’s very high level of debt to GDP,” IMF first deputy director Gita Gopinath said at a news conference.

Reflecting snowball debt, interest payments will nearly double from 8.6 trillion yen by fiscal 2023 to 17.1 trillion yen by the end of the forecast period, the draft government estimate shows.

The government will present the estimate to parliament as a reference for lawmakers’ debates on the next fiscal year’s budget.

The Finance Ministry, in separate projections issued earlier this month, said it could maintain a new bond of around 32 trillion yen over the next few years.

Rounds of stimulus spending for COVID-19 helped boost transmission bonds to 150 trillion yen, which will drop to 130 trillion yen in fiscal 2024, the projections showed.

($1 = 129.9200 yen)