Japanese Prime Minister Shigeru Ishiba has rejected rolling out tax cuts funded by additional debt issuance, as he argued that the Asian nation’s financial situation is worse than Greece’s.
Speaking in parliament on Monday, Ishiba warned that Japan is "seeing interest rates turn positive and its fiscal state is not good", an apparent reference to recent moves by the country’s central bank to end a decades-long stimulus policy last year.
The Bank of Japan has since lifted short-term interest rates to 0.5% and indicated that it would continue to raise borrowing costs until inflation reliably hits policymakers’ 2% target level.
Bond buying is also being slowed by the BOJ, a decision that could stand to drive up bond yields and the government’s cost for funding its debt obligations.
Against this backdrop, Ishiba, who is facing the prospect declining support ahead of a key upper house election in July, has been grappling with calls to slash taxes, including a levy on consumption, and increase spending. But Ishiba noted that while tax revenues are rising, "social welfare costs are also increasing".
Ishiba argued that Japan’s financial situation is now "extremely poor, worse than Greece’s", according to Bloomberg News. Japan has a higher government debt-to-gross domestic product ratio than the Mediterranean country, International Monetary Fund data showed.
However, Japan’s status as a foreign creditor and domestic holdings of sovereign debt have helped it to evade the type of deep fiscal ructions experienced by Greece in 2009, Bloomberg reported.
On Monday, the 10-year Japanese government bond yield was last trading higher at 1.48%, while the 30-year bond yiled had dipped to 2.87%. Bond yields tend to move inversely to prices.