Japan in Depth / Reform needed t

Source

The Yomiuri Shimbun
Prime Minister Shinzo Abe speaks at a meeting of the Council on Economic and Fiscal Policy at the Prime Minister’s
Office on Thursday.

Takanori Yamamoto and Miho Kibiki / Yomiuri Shimbun Staff Writers

With swelling social security costs and slow growth in tax revenues pushing the nation's total debts to a record high, the government must introduce painful measures such as tax hikes and social security system reform to free the nation from its long-standing fiscal dependence on debt.

Whether the government will be able to take concrete steps toward such reform is the key to rectifying the situation.

According to a quarterly report announced Friday by the Finance Ministry, the nation's debts as of the end of June were about 1.01 quadrillion yen. It is the first time the combined total of three types of debt went beyond 1 quadrillion yen. The debt per capita was about 7.92 million yen.

The debts announced every three months by the ministry consist of outstanding government bonds, borrowing and financing bills, issued to finance the national treasury on a short-term basis. It indicates the entire picture of the government’s procurement of funds.

This figure is calculated in a different manner from outstanding long-term debts of the central and local governments, which are expected to total about 977 trillion yen as of the end of fiscal 2013, used for international comparison. This figure excludes fiscal investment and loan program bonds and financing bills.

Mounting JGBs

For about two decades in the postwar period, the government could maintain fiscal management with practically no debt--meaning without issuance of new government bonds--thanks to massive natural increases in tax revenues caused by rapid economic growth.

The first Cabinet of Prime Minister Eisaku Sato in fiscal 1965 issued deficit-financing government bonds for the first time after the war. The Tokyo Olympics were held in 1964 and afterward a tight money policy was adopted, resulting in a business slump.

Deficit-covering bonds were issued to fill the gap between the budget and lower tax revenues. Construction bonds were also issued in fiscal 1966.

Government bonds came to be issued every year to improve the social security system, inclu