Japan's ticking debt time bomb will likely complicate the next central bank governor's task of steering a smooth exit from ultra-loose monetary settings, with rising long-term interest rates already forcing policymakers to amend budget projections.
As a result, Japan spent 22% of its annual budget on debt redemption and interest payment last year, more than the 15% spent on public works, education and defense combined.
"The BOJ must gradually normalise monetary policy. But that won't be possible unless wages rise and Japan's fiscal policy is made more sustainable," said Yuri Okina, head of a private think tank. that "interest rates could increase suddenly, and sovereign stress could emerge" from its rising debt-to-GDP ratio.
Last year, market bets of a near-term rate hike drove up the benchmark 10-year bond yield by 40 basis points to hit a high of 0.48% by year-end. Last month, the yield briefly hit 0.545%, the highest level since June 2015 and above the BOJ's 0.5% cap. The forecasts, used in drafting the budget, are set higher than market levels to ensure government spending plans have buffers against an abrupt spike in borrowing costs. Before YCC, the government's yield estimates hovered around 1.6 to 2.2%.
South Africa Latest News, South Africa Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Possible BOJ Governor Candidate Ueda: BOJ policy is appropriateKazuo Ueda, the academic the Japanese government is reportedly planning to nominate as the next Governor of Bank of Japan (BOJ), said on Friday that t
Read more »
Japan set to appoint Kazuo Ueda as next BoJ Governor – NikkeiJapan set to appoint Kazuo Ueda as next BoJ Governor – Nikkei BOJ CentralBanks USDJPY
Read more »
Japan's wholesale inflation stays elevated, keeps BOJ under pressureJapan's wholesale prices in January rose 9.5% from a year earlier, data showed on Friday, adding to growing signs of inflationary strains that could keep the central bank under pressure to phase out its massive stimulus programme.
Read more »
Japan govt set to appoint academic Ueda as next BOJ governor - sourcesThe government is likely to appoint academic Kazuo Ueda, a former member of the BOJ's policy board, as the bank's next governor, a choice seen by markets as driving it in a more hawkish direction.
Read more »
BoJ’s Kuroda: The benefits of easing are greater than side effectsBank of Japan (BoJ) Governor Haruhiko Kuroda said on Friday, “the benefits of easing outweigh the costs of side effects.” Additional quotes 'BoJ easin
Read more »
Japan Fin Min Suzuki: Japan's fiscal situation severeJapan's Finance Minister Shun'ichi Suzuki crossed the wires in the session on Friday and said pulling the economy out of deflation and achieving stabl
Read more »