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Oct. 19 (Bloomberg) -- Former Japanese Finance Ministry official Eisuke Sakakibara said he isn’t concerned about the market for the nation’s government bonds for the next five to six years because domestic demand will support the securities.
“I’m not worried about the next five to six years,” Sakakibara, 70, a professor at Aoyama Gakuin University, said at a Bloomberg conference in Tokyo. “If you think in terms of 10 or 20 years you have to worry about it, but the solution is very clear. Raise the consumption tax from 5 percent to 15 percent.”
While Japan’s fiscal burden is large, individual assets should back the nation’s ability to absorb debt, Sakakibara said.
Customer deposits at banks in Japan surpassed outstanding loans by 164 trillion yen ($2.1 trillion) at the end of September, according to Bank of Japan data, more than the combined annual economic output of South Korea and Australia. Lenders’ holdings of the nation’s bonds were 158 trillion yen in August, near the record 159 trillion yen reached in April.
Japan’s 10-year yield rose one basis point to 1.02 percent at 1:31 p.m. in Tokyo, versus this year’s low of 0.965 percent set Sept. 22. A basis point is 0.01 percentage point.
Public debt is projected to reach 219 percent of Japan’s economy next year, according to the Organization for Economic Cooperation and Development. About 95 percent of Japan’s debt is held domestically.
Sakakibara also said Japan’s currency may gain past 100 per euro and stay stronger than 80 per dollar. Japan may intervene to weaken the yen, though such efforts will only be successful if coordinated with other nations, he said.
The yen declined 0.1 percent to 105.79 per euro and gained 0.2 percent to 76.70 per dollar today. Japan’s currency has risen 5.8 percent so far this year against the dollar after touching a postwar high of 75.95 yen on Aug. 19.
Sakakibara became known as “Mr. Yen” during his 1997-1999 tenure at the Ministry of Finance for his efforts to influence the yen rate through verbal and actual intervention in the currency markets.
--Editors: Nate Hosoda, Rocky Swift
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