With mounting debt and rising interest rates, Japan's fiscal outlook faces dual pressures

⑴ Data released by Japan's Ministry of Finance on Tuesday showed that by the end of 2025, Japan's national debt had risen to a record 1,342.17 trillion yen (approximately 8.6 trillions). ⑵ The total debt increased by 24.54 trillion yen compared to the same period last year, making it more than twice the size of its economy. ⑶ The debt faces upward pressure mainly due to the continuous expansion of social security, defense, and debt servicing costs, reflecting the rising government bond yields amid long-term interest rate increases. ⑷ The specific debt composition includes 1,197.64 trillion yen in government bonds, 44.13 trillion yen in loans, and 100.40 trillion yen in financing bills. ⑸ Long-term borrowing costs are on an upward trend, driven by market expectations of continued interest rate hikes. ⑹ Meanwhile, the Japanese Prime Minister's pledge to actively expand fiscal spending has further heightened market concerns about the country's fiscal health. ⑺ The continuously rising debt record, together with the high interest rate environment, poses a severe challenge to Japan's long-term fiscal sustainability.