Japan Reluctance to Issue JGBs and Premature Rate Hikes

The report argues that Japan must abandon excessive fiscal austerity and the 60-year JGB redemption rule to finance strategic investment and avoid premature BoJ rate hikes that could stifle recovery.

Key Takeaways

• 1.Japan should abandon the 60-year JGB redemption rule, which is a formality not intended to reduce debt, to allow for bold strategic investment.
• 2.Japan's debt-servicing costs are artificially inflated to 26%; when adjusted to global standards (net interest, excluding redemptions), the cost is only 6%, lower than the US (14%).
• 3.The BoJ risks breaking the capex cycle and triggering further JPY depreciation if it proceeds with premature rate hikes while domestic inflationary pressure is still weak.

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