Japan's central government debt topped 1,000 trillion yen ($10.3 trillion) for the first time ever, the Finance Ministry said Friday.
Debt expanded to a record 1,008.6 trillion yen at the end of June, the ministry said, adding it is likely to reach 1,107.1 trillion yen by the end of next March, as the government has issued a large amount of new bonds to fund large-scale public works projects to pump up the economy in the initial budget for this fiscal year.
According to the quarterly survey, the June total, up 17.0 trillion yen from March, consisted of 830.5 trillion yen in government bonds, 54.8 trillion yen in borrowing mainly from financial institutions, and 123.4 trillion yen in bills to meet short-term financing needs.
The government releases fiscal data every three months compiled according to International Monetary Fund standards.
Fiscal consolidation is one of the significant challenges Prime Minister Shinzo Abe is encountering, as Japan's economy has been recovering on the back of his stimulus dubbed "Abenomics," centering on aggressive monetary easing and massive fiscal spending.
Japan's fiscal health is the worst among major developed economies with its public debt level at more than 200 percent of gross domestic product.
If concern grows over the country's fiscal discipline, it could prod many investors to sell Japanese government bonds and trigger a surge in long-term interest rates that would hurt domestic demand with mortgage rates and corporate borrowing costs increasing, some analysts said.
Planned consumption tax increases from next year are regarded by some international economic organizations as key to Japan's fiscal rehabilitation.
But the government has yet to decide whether to raise the tax rate to 8 percent from the current 5 percent next April as legislated, saying only in the latest medium-term fiscal reform plan it will make a final judgment while "comprehensively taking economic conditions into consideration."
The sales tax rate is scheduled to be finally lifted to 10 percent by October 2015.