Why is Government Debt in Japan so Great? Group 1 Wisnu Widiyantoro, Chris Wang

6/3/2016 The ministry also projected the debt would reach ¥1.167 quadrillion by the end of fiscal 2015 next March, reflecting the need to finance ballooning social security costs with state debt as the population rapidly grays. The latest figure tops the previous record of ¥1.039 quadrillion set in June last year and was more than double Japan’s nominal gross domestic product in 2014, which was ¥488 trillion. Japan’s fiscal health is the worst among the major developed economies. Source: %C2%A quadrillion/#.VcLCULali1F

6/3/2016 What is "Government Debt"? Government debt (also known as public debt, national debt and sovereign debt) is the debt owed by a central government. Government debt is one method of financing government operations, besides imposing tax and issuing currency

6/3/2016 Where's the government debt coming from? Governments of developed and developing countries usually borrow by issuing securities, government bonds and bills. Less creditworthy countries sometimes borrow directly from a supranational organization (e.g. the World Bank) or international financial institutions (IMF).

6/3/2016 Public debt as a percentage of GDP (Source: CIA)

6/3/2016

Debt to GDP ratio is the highest!! 230% now

Deficit to GDP ration rather high

The composition of Japan’s debt Social spending!! Over 30%

Age V.S. Debt positive correlation??

Population of Japan by age(2014) 1950

Why is Government Debt in Japan so Great? Rapid population ageing is putting continued pressure on social spending Rising social spending and inadequate revenues National debt service(interest payment), Public works(government spending) and local government transfer also play a role, however

How to lower the debt The amount of debt makes no sense Debt/GDP does matter – Either Lower debt or boost GDP

What is Japan aiming for?? cut the deficit to 1% of GDP, excluding interest payments, by the year starting in April, 2018 A surplus by fiscal year 2020

What is Japan doing now e.g. The Consumption tax Social spending is necessary and hard to cut Bond Consumption Tax Social spending

Consumption tax Phase 1 – Consumption tax on April 1,2014,up to 8% from 5% in order to get the government’s debt under control Phase 2 – From 8% to 10% in Oct. 2015

Concern Consumption tax ↑ – Debt ↓ – Consumption, Investment ↓ GDP ↓ DEBT/GDP ?????? We need more time to get the answer!!

Thank you for listening~