The Analysis On The Repayment Capability Of Japanese Government Bonds

Since the1990s economic bubble burst, in response to the economic recessionand the aging of the population leads to increased spending on social security andother issues, the Japanese government began a large-scale issued bond. Data showsthat as of June2013, Japan’s debt burden ratio (debt accumulated balance as apercentage of GDP) up to247%, becoming the highest debt burden rate country.From2011, the world’s three major rating agencies have lowered Japan’s sovereigncredit rating. Surprisingly, the decline in Japan’s sovereign credit rating didn’t makeinvestors lose confidence, and Japanese government bonds have not been materiallyaffected.Issuing Government bonds is a government uses its credit to raise funds, so thebonds must be paid in full and on time, and this involves the ability to repay debt.Factors affecting a country’s ability to repay debt including many, such as thecountry’s overall economic strength, government debt management capacity, and theoperational mechanism of financial markets and how much socio-economic bodyhave sold idle funds. This article focused on these aspects to analyze Japan’s abilityto repay debt.First, from economic terms, the uncertainty of economic growth will threatenJapan’s ability to repay debt. To revive the economy, Abe proposed "Abe economics",the so-called "three arrows"-including aggressive financial policies, flexible fiscalpolicy, and economic stimulus plan (JAPAN is BACK).which takes privateinvestment activate as the core. In2013, the Japanese domestic economic indicatedslow growth, but in the long run, because of the special economic situation in Japan,the long-term effects of great uncertainty, Abe should not be overly optimistic. For bonds held by the major economic subjects (banks, companies and households), theyare fully equipped to digest the feasibility and necessity of government bonds, theywill increase Japan’s ability to repay debt.In this regard the government as Japanese government bonds issuance andoperation of the law, orderly flow of the market, derivatives flexible. This aspect hasattracted the majority of investors, on the other hand the effective establishment ofthe system, a sound financial system is also strengthened the confidence of buyers.Finally, Japan is a democratic country, its decision-making consulting systemadministration experience decades of development has been very mature, good today,the government’s decision-making capacity and public confidence in theimplementation of the public was able to get approval from the history is good to acertain extent.From the present situation of Japanese government bonds to proceed, inexplaining its debt risk, based on the economic level from the above, the governmentability to analyze two aspects, the final conclusion: the presence of Japanesegovernment bonds repayment risk, but there is no serious ability to repay short-termproblems. The Japanese government should pay sufficient attention to this issue, theproper control and reduce government debt, and continuously improve theoperational efficiency of government bonds on the basis of the strategic goals ofeconomic growth. Japan’s debt situation has a lot of inspiration to our country, thepaper put forward three specific recommendations: Firstly, to control governmentdebt, improve our national debt management; Secondly, establish and improve ourbond market; Thirdly, to strengthen economic development, a fundamental raise thedebt repayment capacity.