Japan's Debt Time Bomb: Will the Land of the Rising Sun Sink?

Up to 2025, Japan is faced with a serious debt crisis since its general government debt escalated to about 235% of its GDP, even outpacing Greece's peak crisis at 142%. The state had feared that the finances of Japan are worse compared to those of Greece based on such aspects as escalating interest payments, declining GDP, and rising social welfare expenses of an aging population.

The debt crisis has prompted a steep increase in Japanese government debt yields, especially super-long-term debt, to record highs following weak demand at the debt auctions and uncertainty regarding long-term fiscal solvency. With the Bank of Japan slowing its bond purchases, unwinding years of monetary stimulus, the pressure is mounting, adding to rising yields and volatility in the market. Its current debt servicing cost already represents a whopping 22% of its budget, and higher interest rates will continue to bear down on public coffers. The ballooning debt crisis has already resulted in increased borrowing rates by the Japanese government, which may start a debt and interest payment vicious circle. A depreciating yen, which is caused by lost market confidence, can stimulate more inflation and increased import prices. Japanese government bond markets have been more unstable, and other global financial markets are damaged due to Japan's being a large creditor and U.S. debt holder