Holy Shinzo: Japan debt hits 1 quadrillion yen for first time

Japan's central government debt topped 1,000 trillion yen ($10.3 trillion) for the first time ever, the Finance Ministry said Friday, at a time when Prime Minister Shinzo Abe prepares to make a final decision on whether to carry out a sales tax hike as scheduled in an attempt to restore the nation's fiscal health.

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 next March, as the government has issued a large amount of new bonds this fiscal year to fund large-scale public works projects to pump up the economy.

The Japanese government has boosted bond issuance to finance reconstruction work from the devastating March 2011 earthquake and tsunami, which has also pushed up the outstanding balance of public debt, the ministry added.

Per-capita debt -- or the amount owed per head of population -- was about 7.92 million yen as of the end of June, given that Japan's total population was around 127.35 million as of July 1.

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 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.

Consumption tax increases 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 judgment while "comprehensively taking economic conditions into consideration."

Some lawmakers and government officials have called on Abe to put off the tax hike, arguing it would dampen consumer spending and in turn the economy, which has shown signs of breaking out of nearly two decades of deflation.

Abe instructed his Cabinet members on Thursday to launch a panel of experts to assess the possible impact on the economy of the tax measure, the first round of a two-stage increase to 10 percent by October 2015 to cover swelling social security costs in Japan's aging society.

The premier has said he will make a final decision on the tax matter in the autumn.