Japan Faces 240% Debt Trap as BoJ Bond Buying Weakens Yen
Updated
Updated · robinjbrooks.substack.com · Jun 3
Japan Faces 240% Debt Trap as BoJ Bond Buying Weakens Yen
3 articles · Updated · robinjbrooks.substack.com · Jun 3
Summary
Gross public debt at 240% of GDP is the core vulnerability, with the report arguing Bank of Japan bond purchases are holding long-term yields artificially low and shifting what would be a bond-market crisis into yen depreciation.
30-year Japanese yields sit roughly in line with Germany's despite far heavier debt, a gap the author says shows fiscal risk is being suppressed; even as the BoJ slows purchases, the yen keeps falling because market-set yields would likely be much higher.
Net debt of about 130% of GDP reflects large government financial assets, but the report says those assets need to be sold to pay down debt directly rather than relying on repeated FX intervention to defend the currency.
Dollar-yen intervention has helped cap USD/JPY near 160, yet the report argues its effect is fading and that selling reserves signals denial of the debt problem, while privatizations and domestic asset sales would more credibly support the yen and lower yields.