“Japan's public sector is essentially bankrupt”(Financial Times London 15 December 2000). The government has a public sector debt well above 160 per cent of gross domestic product. However Government Bonds market conditions are bubbly. Why? Because the Bank of Japan buys Government Bonds from the market each month to support bond prices through money-market operations.
The Bank of Japan buys Government Bonds from banks paying them by placing the money in reserve current accounts. Raising the target for the balance of current accounts is designed to increase lending. But poor growth prospects steered banks into Government Bonds as the least risky investment. Banks hold Government Bonds about the Y93 000bn of 20 per cent of outstanding Government Bonds by holder on 2003 year-end.
If Government Bonds bubble burst many banks will face a shortage of net worth some banks will fail and financial systemic risks will trigger economic crisis. Or an Ultra-loose Monetary Policy will trigger hyperinflation someday. That's Japanﾕs big issue.詳しくは、拙稿「日銀信用に依存した国債市場と増大するリスク」中央大学企業研究所『企業研究』第５号、2004年10月、を参照してください。
