Japan’s public debt has surpassed 1,100 trillion yen, making it the highest among developed nations in terms of GDP ratio—over 250%. Yet, within Japan, anxiety about this level of debt is surprisingly low. A growing number of Japanese citizens and economists seem to believe that it poses little to no risk. But why?
Let’s explore why many in Japan have come to accept massive national debt as manageable—and whether that belief is truly justified. 🇯🇵💰
🧠 The Core Logic: “It’s Our Own Debt”
One of the most common beliefs in Japan is this:
“Most of our debt is owned by Japanese people, so it’s not a problem.”
Roughly 90% of Japanese government bonds are held domestically—by the Bank of Japan, local banks, insurance companies, and even ordinary households. Since the government essentially “owes money to itself,” this logic suggests there’s no risk of sudden collapse like in countries that rely on foreign borrowing.
In addition, all Japanese government debt is denominated in yen. This means Japan can always issue more currency to meet its obligations, unlike countries burdened by foreign-currency debt.
💡 Why This View Is Gaining Popularity
This way of thinking has become more accepted for several reasons:
- Low inflation for decades
Despite massive money printing and public spending since the 1990s, Japan has seen very little inflation. Prices have remained mostly stable, and interest rates have hovered near zero for years. - Huge personal savings
Japanese households collectively hold over 2,000 trillion yen in financial assets. This domestic wealth provides a strong buffer and consistent demand for government bonds. - Strong global financial position
Japan is the world’s largest net creditor, holding more foreign assets than any other nation. This gives it additional economic credibility on the global stage. - Trust in institutions
Many Japanese have high trust in the stability of the central bank and government financial institutions. They believe policies will be adjusted if risks emerge.
🔥 But Is It Really Risk-Free?
While the optimism is understandable, not everyone agrees that Japan’s debt is harmless. Some economists and policymakers argue:
- Inflation can return suddenly
If economic growth accelerates or global trends shift, inflation could rise—making debt repayment more expensive. - Bond markets aren’t immune
Even if bonds are domestically held, investors could demand higher yields if they lose confidence in the government’s fiscal discipline. - Future generations will pay
A large public debt burden could limit future spending on social programs, healthcare, or education—especially in an aging society like Japan. - Printing money has limits
Relying on currency issuance to fund debt might weaken the yen, hurt imports, and reduce purchasing power over time.
🤔 So Why Do So Many Still Feel Comfortable?
In short, because the risks haven’t materialized yet.
For over 30 years, Japan has defied the usual economic warnings. Massive debt didn’t cause a crash. Inflation stayed low. Interest rates barely moved. Many Japanese have come to view their system as uniquely stable, and some even see public debt as a tool to support the economy—not a threat.
This mindset has shaped everything from public policy to political debates. Ideas once considered fringe—like the belief that governments can safely run large deficits—have quietly become mainstream in Japan.
📝 Final Thoughts
Japan’s approach to public debt challenges traditional economic thinking. While many other countries fear crossing the 100% debt-to-GDP line, Japan has long passed it—and kept going.
Whether this is a brilliant economic adaptation or a long-term gamble is still up for debate. But one thing is clear: for now, most Japanese people—and their government—aren’t losing sleep over it.
