Japan’s government owes a staggering 1,324 trillion yen—that’s roughly $9 trillion, or enough money to buy every Major League Baseball team about 300 times over. Despite this enormous debt burden, Japan’s Finance Minister recently brushed off fears that the country might default on its payments, expressing confidence in the nation’s financial stability.
Japan owes $9 trillion yet officials remain confident the nation won’t default on its massive debt obligations.
The debt situation looks pretty scary on paper. Japan’s debt equals about 235% of everything the country produces in a year, making it the most indebted major economy in the world. To put this in perspective, if Japan’s economy were a pizza, the debt would be more than twice the size of that pizza.
The United States, by comparison, has debt equal to about 120% of its economic output.
However, Japan’s Finance Minister points to one key difference that makes the situation less worrying. Most of Japan’s debt is owned by Japanese people and institutions, not foreign investors. It’s like owing money to your family rather than to strangers—there’s usually more patience and understanding involved.
The government has been changing how it borrows money, shifting toward shorter-term bonds and introducing new types of bonds to attract more investors. Think of it like switching from long-term car loans to shorter payment plans that are easier to manage.
But challenges remain. Japan’s population is aging rapidly, which means more spending on healthcare and pensions. About a quarter of the government’s budget now goes to paying interest on this massive debt.
The ruling Liberal Democratic Party lost its majority in late 2024, and public support dropped to just 24% in 2025. This political uncertainty makes it harder to implement necessary reforms.
Meanwhile, interest rates are creeping up. The cost of borrowing money for 10 years reached 1.58% in July 2025, which might not sound like much, but it markedly increases the government’s monthly bills when you’re dealing with trillions of yen. In an unprecedented move, the Bank of Japan has also been selling off its ETF holdings to address market stability concerns. Foreign monetary policies from Japan’s central bank often impact global markets, as rate changes abroad can divert international investment flows and influence currency values worldwide.
Global investors are watching Japan closely because what happens there could affect borrowing costs worldwide. Other heavily indebted countries are also paying attention, wondering if Japan’s approach might work for them too.
