Institute of International Finance February 22, 2026

IIF Asia Economic Views: Japan’s Fiscal Constraint Without Fiscal Stress

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Japan’s fiscal constraint becomes clearer when public assets and liabilities are considered together. Extensive public ownership of debt shifts attention from a sudden funding shock to valuation changes across the consolidated balance sheet. Slow refinancing provides a cushion, but that protection narrows if effective borrowing costs overtake growth or pension and foreign assets lose value.

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Jonathan Fortun (2026). IIF Asia Economic Views: Japan’s Fiscal Constraint Without Fiscal Stress. Institute of International Finance.