What about Japan?

YiLi Chien, Harold Cole and Hanno Lustig

No 31850, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Over the last decade, the Japanese public sector has primarily borrowed at floating rates while investing in longer-duration risky assets, earning an annual return exceeding 6% of GDP above its funding costs. We quantify the impact of Japan’s low-rate policies on its government and households. The government duration mismatch expands fiscal space when real rates fall, helping the government fulfill promises to older households. A typical younger Japanese household does not have enough duration in its portfolio to continue to finance its spending plan and will be worse off. Low-rate policies tend to tax younger and less financially sophisticated households.

JEL-codes: E63 F30 (search for similar items in EconPapers)
Date: 2023-11
Note: AP EFG IFM ME PE
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Working Paper: What about Japan? (2025)
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