Welcome to The Daily Brief. Japan’s government debt has swelled to nearly nine trillion dollars—more than twice the size of its economy—and now even low interest rates can’t hide the strain. For years, Tokyo fueled public works, pandemic relief and social security for an aging population by borrowing at rock-bottom rates. But as the Bank of Japan moves away from negative interest rates, bond yields have spiked to multi-year highs. Prime Minister Shigeru Ishiba warned of the “terror” of higher rates and likened Japan’s finances to Greece before its crisis. Former vice finance minister Koji Yano adds, “Yellow lights are flashing, and at any moment any of them could turn red.” Ahead of summer elections, pressure mounts to cut taxes or boost spending for farmers, small businesses and consumers squeezed by inflation. Yet every new program risks stoking borrowing costs even further. Japan now faces a stark choice: trim its deficits or accept a heavier debt burden for generations to come.
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