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Japan’s debt burden surpasses Greece, raising red flags over fiscal policy
Prime Minister Shigeru Ishiba sparked debate across political and economic circles by describing Japan’s economic outlook as worse than Greece’s. This is a striking comparison that has raised concerns about the country’s fiscal health.
Speaking in parliament on May 19, Ishiba rejected the idea of cutting taxes through new debt issuance. In his view, Japan’s fiscal health is now worse than that of Greece.
Ishiba cited rising interest rates and a deteriorating fiscal environment as key threats. The comment appeared to be a veiled critique of the Bank of Japan (BOJ), which ended its long-standing monetary stimulus policy in 2024.
Since then, the BOJ has raised short-term interest rates to 0.5%, signaling that further hikes may follow until inflation reaches the 2% target. The central bank has also scaled back its bond purchases, which could drive up yields and increase government debt servicing costs.
Against this backdrop, Ishiba faces growing political pressure to cut taxes, including the consumption tax, and increase spending. However, he pushed back, noting that while tax revenue is rising, social welfare expenses are increasing just as fast.
According to Bloomberg News, Ishiba warned that Japan’s debt-to-GDP ratio now exceeds that of Greece. Data from the International Monetary Fund (IMF) confirms that Japan’s public debt is indeed higher than Greece’s, in relative terms.
What shields Japan from a Greek-style crisis, however, is its status as a top global creditor and the fact that its sovereign debt is mostly domestically held. These factors have so far spared Japan from the kind of financial turmoil Greece endured during the 2009 sovereign debt crisis, analysts at Bloomberg noted.
Published 22 May 2025
© InstaFintech Group
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© InstaFintech Group
