Japan’s debt-funding costs to hit $257 billion next year

Japan’s debt-funding costs to hit $257 billion next year: document

2:48am EDT

By Takaya Yamaguchi

TOKYO (Reuters) – Japan expects to spend a record $257 billion to service its debt during the next fiscal year, a document obtained by Reuters showed, underscoring the huge burden created by the government’s borrowings. The amount to be allocated for debt-servicing for the year that will begin on April 1 is nearly as large as the gross domestic product of Singapore, which the World Bank put at $275 billion at the end of 2012.Japan’s Ministry of Finance (MOF), charged with drafting the state budget and issuing government bonds, will request 25.3 trillion yen ($257 billion) in debt-servicing costs under the budget, the document showed on Tuesday.

That will be up 13.7 percent from the amount set aside for the current fiscal year, reflecting the ministry’s plan to guard against any future rise in long-term interest rates.

The increased debt-servicing cost may heighten pressure on Prime Minister Shinzo Abe to proceed with a scheduled two-stage sales tax hike from next year, which is seen as a necessary first step in fixing Japan’s tattered finances.

But with Abe having made ending 15 years of deflation and revitalization of Japan’s economy among his top policy priorities, some of his advisers and members of his ruling Liberal Democratic Party want to delay or water down the tax hikes, worried they could hurt a budding economic recovery.

Years of fiscal stimulus to revive a stagnant economy and surging social welfare costs for a rapidly ageing population have led to Japan running a record 1,000 trillion yen ($10 trillion) in public debt, double the size of its economy and the biggest among major industrialized nations.

The MOF will compile spending requests for next fiscal year’s budget, including its own to fund debt-servicing costs and other expenses, and draft the state budget, which needs government and parliament approval to take effect.

 

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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