Research On The Sustainability Of Japan’s National Debt Policy

The policy of national debt as the most important part of fiscal policy plays anirreplaceable role in a country’s economy. The practice of national debt policy showsthat use the policy of national debt scientifically and reasonably plays positive role inpromoting economic development, but abuse and even excessive use not only makethe policy of national debt difficult, may also lead to the debt crisis. Japan is one ofthe countries of using the national debt policy the most frequently. After the issuanceof treasury bonds since1965, the national debt policy has played an important role inthe economic development. But excessive use of national debt policy also made Japancarry a heavy debt burden. In theory, the academia always has a negative attitude toJapan·s high debt policy. According to the data, long-term high debt did not causeserious debt crisis and confidence crisis in Japan; In the future, Japan will continue tomaintain high national debt policy in a short time, the possibility of reducing the scaleof national debt greatly is very low. Then, the reasons why national debt did not causethe debt crisis in Japan, and whether the policy will continue, deserve deeperexploration.Firstly, the dissertation elaborated the theory evolution of the national debt policysystematically. There has considerable controversy with the policy of national debt,generally include that treasury is beneficial and treasury is harmful as well as treasuryis neutral. Then, starting from the sustainable thought, the dissertation sorted out thesustainability theory of national debt from three angles of economic effect, risk andmoderate scale.From the historical evolution of national debt policy, after issuing the nationaldebt since the mid of1960’s, Japan has used the national debt policy in everyeconomic fluctuations. The issuance of treasury bonds experienced the process fromsmall scale of less species to wide variety of mass, and its objective was converted from making up for the deficit in short-term to stimulate economic development inlong term. The issuance of treasury bonds became one of the most important and themost frequently used means of macroeconomic policy. From the historical evolutionof national debt management mechanism, on the beginning of the national debt, Japanhas attached great importance to national debt, and has formed managementmechanism including the release mechanism and repayment mechanism as well asdistribution mechanism.The dissertation analyzed the sustainability of national debt policy in Japan fromthree angles of the necessity, possibility and long-term.On the necessity, starting from the overall effect of national debt policy oneconomic growth, the dissertation carried regression analysis, co-integration test andgrander causality test to the net national debt on private spending from1965to2013,and carried correlation analysis to net issuance of treasury bonds and money supply ofM1, M2, M3from2004to2013.Then the paper tested the correlation between nationaldebt issuance and central bank discount rates from1965to2013, and between totaloutstanding debt and lending rates from1998to2013. The empirical analysis showsthat Japan’s national debt policy has a positive effect on private spending, and has alimited influence on the money supply, but has no impact on interest rates.On the long term, according to the actual situation of Japan, the paper selectedrelated index carefully, and built a multi-level risk analysis system. Based on thesingle and single layer analysis, the paper carried comprehensive evaluation to theload indexes and repays indexes as well as structure indexes from1984to2013inJapan. It is found that the general risk of government bonds is very high, but theperiod of rapid growth is over, and the growth rate tends to be gentle.On the possibility, the dissertation judged the moderate scale of Japanesegovernment bonds using four indicators such as the fiscal deficit rate, national debtdependence, government debt service ratio, debt liabilities rate, and making acomparison between national debt scale growth rate, national debt interest rate and GDP growth rate. Results show that the government debt has been more thanmoderate level in Japan. But determine standard has a large flaw in general, by reexamining, it is found that only the deviation between treasury debt ratio and itschanges with the theoretical standard is larger, which can not explain the Japanesegovernment bonds has been more than a moderate scale.Finally, the dissertation summarized the positive and negative factors of effectingdebt sustainability in Japan from economic factors, market factors and governmentdebt management, and it is found that Japanese economic base is relatively solid, debtfinancing costs is lower, the management mechanism is meet to the policy of Japanesegovernment bonds, financial market conditions is better. The empirical analysis showsthat the Japanese national debt policy has positive effect on the economy; In a shortterm, the probability of a serious outbreak of the debt crisis is lower; But the scale ofnational debt cannot be simply identified that is more than moderate scale. In general,the Japanese national debt policy is sustainable at present. However, because of therigidity of the financial revenue and expenditure, the little possibility of reducing thescale of debt issuance, there is instability in long-term if the economy is notsignificantly improved in Japan.