P reface

h at is D ebt Management Policy?

(1) Ov erv iew

U nder the F Y 2 0 1 6 budget, the central gov ernm ent plans to issue JGBs worth 1 6 2 .2 trillion
y en, posting a decline of 7 .8 trillion y en f rom

the initial lev el f or F Y 2 0 1 5 . C onstruction

Bonds and Special Deficit-financing Bonds to provide General Account revenues decline by
2 .4 trillion y en f rom

the initial lev el f or the prev ious y ear to 3 4 .4 trillion y en. O n the other

hand, JGBs outstanding at the end of F Y 2 0 1 5 totaled as m uch as 9 0 1 .5 trillion y en.

T he gov ernm ent also raises necessary f unds with other f inancing m ethods than JGBs,
such as F inancing Bills and Borrowings. I f these f actors are tak en into account, the central
gov ernm ent s debts resulting f rom

its f iscal operations total as m uch as 1 ,0 4 9 .4 trillion

y en. M oreov er, the gov ernm ent giv es guarantees to I ncorporated Adm inistrativ e Agencies
in order f or them

to carry out f unding to im plem ent public proj ects, and the gov ernm ent-

guaranteed debt totals 41.8 trillion yen (The figures are at the end of FY2015.).
Both the f undraising am ount and the outstanding balance of gov ernm ent debt continue
to increase. Gov ernm ent debt m anagem ent af f ects not only the choice of f inancial assets
of economic entities such as corporations and households, but also the flow of funds on a
m acro- scale, which ev entually would inf luence interest rates. I n turn, changes in m ark et
interest rates influence government funding activities and the activities of every economic
entity .
T he gov ernm ent, theref ore, needs to m anage properly the stock and f low of gov ernm ent
debts associated with fiscal operations, including JGBs, Financing Bills, Borrowings and
gov ernm ent- guaranteed debt. T his adm inistration is called debt m anagem ent, and how to
m anage debt is ref erred to as debt m anagem ent policy . Besides gov ernm ent debts, there
are sev eral f orm s of public debts including f uture pension pay m ents, local gov ernm ent
bonds and I ncorporated Adm inistrativ e Agencies liabilities. S uch public debt would af f ect
gov ernm ent debt m anagem ent through the m ark et interest rate f orm ation m echanism .

P reface

Borrow ings

Borrow ings

L ocal
Government

Government
Financial
Institutions

L ocal Government Bonds

P ublic Issue Bonds

Government-Guaranteed Bonds

FL IP A gency Bonds, Borrow ings

Government Bonds
(FIL P Bonds)

Government Guaranteed Bonds

Government-Guaranteed Borrow ings

Fiscal L oan
Fund
Borrow ings

Government Bonds
(R efunding Bonds)

Government Bonds
(Construction Bonds, Special
Deficit-Financing Bonds)

Government Bonds (R econstruction Bonds)

Government Debt
Consolidation Fund
(Special A ccount)

Incorporated
A dministrative A gencies

Special A ccounts

Bor
row
ings
(ass
ume
d de
bts)

Go L o
v c
Bo ernm al
nd e
s nt

General
A ccount

T he shaded area
represents gov ernm ent debts.

C o n c e p tio n a l D ia g r a m

Lo
ca
lG
Bo ove
nd rnm
s e
nt

F i g .1 P u b l i c D e b t s

I n addition to these
debts, there are gov ernm ent
bonds that are held by the
Bank of Japan as a m eans of
open m ark et operations.
T h e G o v e r n m e n t Guaranteed Bonds issued by the
Japan F inance O rganization f or
M unicipalities, are issued only
f or ref unding of Gov ernm entGuaranteed Bonds conv erted
f rom the f orm er Japan F inance
C orporation f or M unicipal
Enterprises.

F in a n c ia l M arkets
(as of A pril 1, 2016)

(2) Framework of Gov ernment Funding Activ ities

T he gov ernm ent issues JGBs and carries out Borrowings ( ) in order to f inance its annual
gov ernm ent ex penditures. I n addition, F inancing Bills are issued to cov er tem porary cash
shortage for daily cash management of the National Treasury. Out of the topics referenced above,
the f ram ework of ( central) gov ernm ent f unding activ ities will be discussed in this section.
F i g .2 N a t i o n a l T r e a s u r y R e c e i p t s a n d P a y m e n t s
P ayments
R edemption of JGBs,
repayment of long-term
Borrow ings
L ocal allocation tax ,
general ex penditures,
other payments such as
pension benefits

R eceipts
Issuance of Financing Bills
Issuance of JGBs
(including R efunding Bonds),
long-term Borrow ings

Fund-raising to cover
temporary cash
shortage of the
National T reasury.
Fund-raising to meet
annual government
ex penditure demands

T ax es and other revenue

National T reasury

A ll receipts and payments of the cash in the

National T reasury is made through the BOJ.

P rivate Sector

T he central gov ernm ent budget consists of the General Account and 1 4 S pecial Accounts ( as of April
1 , 2 0 1 6 ) , and all receipts and pay m ents in these accounts are m anaged through the Bank of Japan
( BO J) . T he gov ernm ent sm oothly im plem ents spending under the budget by raising f unds through
the issuance of JGBs and Borrowings to m eet annual gov ernm ent ex penditure dem and and by the
issuance of Financing Bills to cover temporary cash shortage of the National Treasury as follows.
4

U nlik e JGBs, Borrowings

are a f orm of f unding that
does not inv olv e the issuing
of securities.

P reface
A. J GBs and Borrowings to meet annual gov ernment ex p enditure demand
T he gov ernm ent issues JGBs and carries out Borrowings that constitute a part of
government revenue in order to finance annual government expenditures. The government
sm oothly im plem ents budget spending by raising f unds in this way as necessary .
I n addition to planning the gov ernm ent debt m anagem ent policy , the F inancial Bureau of the
M inistry of F inance im plem ents the policy through conducting JGB auctions, issuance and
redem ption, and auctions f or Borrowings.

B. Financing Bills to cov er temp orary cash shortage of the N ational Treasury
T he central gov ernm ent: m inistries, agencies or special accounts carry out a lot of f iscal
activ ities ev ery day . All the receipts and pay m ents are m ade through the BO J f or their
integrated handling in the National Treasury. As explained in section A, the government
raises f unds through the issuance of JGBs and Borrowings to cov er annual gov ernm ent
ex penditures. H owev er, the gov ernm ent sees tem porary cash shortage and surplus due to
lags of day - to- day receipts and pay m ents of gov ernm ent f unds. T he F inancial Bureau of the
M inistry of F inance m ak es adj ustm ents through the issuance of F inancing Bills in the case
of shortage, and through the tem porary use of the treasury surplus in the case of surplus
(Cash Management in the National Treasury)() .
Based on what was described abov e, the chart below prov ides an ov erv iew of the v arious
elem ents of public debts and lists the relev ant ref erence points in this report.
F i g .3 V a r i o u s E l e m e n t s o f P u b l i c D e b t s a n d R e l e v a n t R e f e r e n c e P o i n t s i n T h i s R e p o r t

R ev enue ref ers to cash

receipts to cov er annual
gov ernm ent ex penditures in a
specif ic f iscal y ear. F inancing
Bills, which are issued to
manage the National Treasury,
are not counted as rev enue,
since F inancing Bills are
redeem ed with the rev enue of
the same fiscal year.

T opics Inside T his R eport (for details, see Contents)

Debts from government funding

Government Debts

P ublic Debts

Debts associated w ith financing

government activity

General Bonds

FIL P Bonds
Financing Bills
Borrow ings

Government-Guaranteed Debt
Subsidy Bonds

T rends of JGB M arket in FY2015

P 8
JGB Issuance P lan for FY2016
P 19
Diversification of JGB
Investor Base
P 31

(Framework)

(Appendices)

Chapter 1

Chapter 1

P rimary M arket for

1 P rimary M arket for
Government Bonds
Government Bonds
P 40
P 110
Secondary M arket for
2 Secondary M arket for
Government Bonds
Government Bonds
P 60
P 121
Debt M anagement Systems
P 72 3 Debt M anagement

T ax ation of Government Bonds

Systems
P 85
P 138

Chapter 2 1 Financing Bills

Chapter 2 2 Borrow ing

P 90
P 92

Chapter 2 1 Financing Bills

Chapter 2 2 Borrow ing

P 153
P 155

Chapter 2 3 Government-Guaranteed Debt Chapter2 3 Government-Guaranteed Debt

P 94
P 159
Chapter 2 4 Subsidy Bonds

P 97

Other
P ublic Debts

L ocal Government Bonds

Chapter 3 1L ocal Government Bonds

Chapter 3 1 1L ocal Government Bonds
P 99
P 164

Debt of Incorporated
A dministrative A gencies, etc.

Chapter 3 2 Debt of Incorporated

Chapter 3 2 Debt of Incorporated
A dministrative A gencies, etc.
A dministrative A gencies, etc.
P 103
P 167