Japan Govt Worsens Debt-to-GDP Ratio Estimate for FY 2026

Tokyo, July 30 (Jiji Press)--The Japanese government said Thursday that the ratio of total central and local government debts to the country's gross domestic product is estimated to be 187.6 pct in fiscal 2026, 1 percentage point higher than in the previous January projection.

The higher debt-to-GDP ratio, presented at a meeting of the Council on Economic and Fiscal Policy chaired by Prime Minister Sanae Takaichi, reflects additional issuances of deficit-covering Japanese government bonds to fund the supplementary budget of more than 3 trillion yen passed last month.

The government also revised down its GDP growth forecast in light of the conflict in the Middle East.

The Takaichi administration has newly designated the debt-to-GDP ratio as the centerpiece of its fiscal targets. It estimated Japan's GDP growth and fiscal balance through fiscal 2040 based on the latest economic conditions, taking into account a plan for more than 370 trillion yen in public-private investments by fiscal 2040 as part of its aim to build a stronger economy, as well as additional annual government spending of about 10 trillion yen from fiscal 2027.

Japan's debt-to-GDP ratio is expected to improve even if the government increases JGB issuance to some extent, as long as GDP growth accelerates.

[Copyright The Jiji Press, Ltd.]