ARTICLE AD BOX
Japanese prime minister Shigeru Ishiba said his country’s financial condition was worse than Greece’s as he rejected calls for tax cuts at a time of rising borrowing costs.
Mr Ishiba said he didn’t think it was a good idea to fund tax cuts with government bonds just days after the economy was reported to have shrunk for the first time in a year, and at a pace faster than expected, in the face of US president Donald Trump’s trade policies.
Opposition parties have been putting pressure on Mr Ishiba to cut taxes, including consumption tax.
Japan’s GDP for the March quarter contracted by 0.7 per cent as against the median market forecast of 0.2 per cent, data released last week showed.
“It’s important to recognise the dangers of a society and a world with interest rates. The government is not in a position to comment on interest rates, but the reality is we are facing a world with them. Our country’s fiscal situation is undoubtedly extremely poor, worse than Greece’s,” the prime minister told the parliament on Monday.
“Japan is seeing interest rates turn positive and its fiscal state is not good," he said, warning of the rising costs of funding the already enormous national debt. "While tax revenues are rising, social welfare costs are also increasing.”
According to the International Monetary Fund, Japan’s general government debt as a percentage of gross domestic product stood at 234.9 per cent as of 2025 while it was at 142.2 per cent for Greece.
Japan, however, has managed to escape a fiscal crisis of the kind Greece witnessed in 2009 because domestic investors hold most of its sovereign debt and it remains a major creditor to other nations with significant foreign asset holdings.
Finance minister Katsunobu Kato said while Japan was not facing difficulty raising funds through debt issuance now, it must strive to maintain market trust in its finances.
"A loss of market trust in our finances could lead to sharp rises in interest rates, a weak yen and excessive inflation that would have a severe impact on the economy," Mr Kato told the same parliament session.
The decline in GDP is being attributed to stagnant private consumption and falling exports, suggesting Japan’s economy was losing support from overseas demand even before Mr Trump announced sweeping import tariffs on almost all major trading partners in early April.
Japan faces the prospect of at least a 24 per cent levy starting in July unless it can negotiate a deal with Washington.
In addition, the US has announced a 25 per cent import levy on cars, steel and aluminium, dealing a blow to Japan's economy which relies heavily on automobile exports to America. Japanese automakers, in fact, are already feeling the pain.
English (US) ·