Abenomics in the Second Stage

~Challenges for the Long-term Growth and

Fiscal Consolidation

March 2016

Kenta Ichikawa

Ministry of Finance, Japan

600 tril yen

Economy

Disclaimer

The views expressed herein are those of the author and do not necessarily reflect

the opinions of the organizations to which the author belongs.

-2.5

-2

-1.5

-1

-0.5

0

0.5

1

1.5

2

2.5

2011 2012 2013 2014 2015 2016

（%, change from the previous year）

（CY）(Note) The effects of consumer tax rate change in April 2014 on CPI are eliminated.(Source) MOF, Cabinet Office, Ministry of Internal Affairs and Communications, BOJ

527

499

503

519

538

525

527

544

460

470

480

490

500

510

520

530

540

550

ⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣ

2011 2012 2013 2014 2015 2016 2017

(trillion yen)

(CY)

Mar. 2011

The Great East Japan

Earthquake

Abenomics

Real GDP

Real GNI Nominal GNI

Nominal GDP

Abenomics is strengthening Japan’s “earning power” in the global market, and Japan is getting out of deflation.

(Source) Cabinet Office, Government of Japan "Quarterly Estimates of GDP", "Fiscal 2016 Economic Outlook (Dec, 2015)" 2

Abenomics

1.1

0.0

2.5

1.6

0.8 0.8

-2.3

(Source) Bloomberg

70

80

90

100

110

120

130

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

Jan

-11

May

-11

Sep

-11

Jan

-12

May

-12

Sep

-12

Jan

-13

May

-13

Sep

-13

Jan

-14

May

-14

Sep

-14

Jan

-15

May

-15

Sep

-15

Jan

-16

Nikkei Stock Average (LHS)

USD/JPY (RHS)

(yen) (dollar/yen)

0

0.2

0.4

0.6

0.8

1

1.2

1.4

230

235

240

245

250

255

260

265

270

08 09 10 11 12 13 14 15

Real Compensation of Emplyees

Nominal Compensation of Employees

Job Opening-to-Application Ratio (RHS)

（Seasonally adjusted、

trillion yen）

（CY）

Employment and Wage （ratio）

Market may fluctuate, but economic fundamentals are solid. Good cycles are developing in the economy.

3 (Source) Ministry of Finance, Cabinet Office, Ministry of Health, Labour and Welfare

(Note) The figures of “Corporate Earnings” exclude financial and insurance industry.

0.0

5.0

10.0

15.0

20.0

25.0

Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ

2011 2012 2013 2014 2015

百万

Corporate Earnings(trillion yen, seasonally adjusted)

(CY)

All industry

Non-manufacturer

Manufacturer

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ

11 12 13 14 15

Capital Investment (excl. softweare)

(CY)

(%, change from the previous year)

100

105

110

115

1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10

2011 2012 2013 2014 2015

Consumption

Private Consumption Integrated

Estimates (seasonally adjusted

series)

(CY2005=100)

Consumption Tax Hike

5% → 8%

Consumption Tax Hike(apporoved by the Diet)

40.75

37.00

33.33

29.97(2016)→29.74(2018) 29.72

25.00 24.20

20.0017.00

0

5

10

15

20

25

30

35

40

45

U.S. France Germany China Korea U.K. Singapore

(%)

34.62（2014）

32.11（2015）

Growth Strategy continues evolution.

4

Immigration

Special economic zones

(SEZs)

Agriculture

Energy

Tax reform

Womenomics

A

B+

B

C

Corporate governance

Labour reform

A

B

C

D

Grade

“Abe Scorecard”

(Sep 10, 2015 Financial Times p.6) Economic effect boosting up GDP by 2.6% (13.6 trill yen)

(Projection by Cabinet Secretariat)

① Successful Agreement of TPP negotiation Oct 5, 2015

② FY2016 Tax Reform Bill reduced Corporate Tax Rate Dec 24, 2015 (cabinet decision)

③ Employment Insurance Reform Bill Jan 29, 2016 (cabinet decision)

・Expand the coverage to non-regular workers (Oct 2016-)

・Decrease the insurance premium rate (1.0%→0.8%）

・Expand child care and long-term care leaves

→ Further discussion on labor market reform

Japan

Progress after Scorecard

Abenomics’ initiatives in “Labor participation”, “Support for working generation” and “Distribution” should effectively address structural bottlenecks, and strengthen Japan’s growth potential.

5

Positive Cycle of Growth and Distribution

GDP 600 trillion yen by 2020

・・・ 6.55 mil seeking job 2.95 mil want longer working hour

Creating Market for Age-related

Demand   (utilizing idle property)

Privatization of Public Welfare

Service

Promotion of Global Marketing   (regional tourism resources, healthy

and long life service)

Labor Participation and Human

Resource Development (removal of tax / insurance disincentives,

expanding child care and long-term care

support, retirement age)

Structural Reform (corporate governance reform)

Capital Investment, R&D   (supporting innovation, enhancing

inward investment)

Improvement of Disposable Income

 (wage negotiation, minimum wage (+3%/yr), employment

insurance)

Establishing “Equal Pay for Equal Work”

Continued Policy Support for Working Generation

  child care, education birthrate 1.8

  long-term care no one is forced to quit his/her job

Demand Side Supply Side

Income / Distribution

New Three Arrows (Targets) Sep.2015

① GDP 600 tril yen

② birthrate 1.8

③ no quitting job for long-

term care of parents

-16.0

-12.0

-8.0

-4.0

0.0

4.0

2001 2006 2011 2016

(%)

Japan

U.S.

U.K. France

Italy

Canada

Germany

6

Fiscal balance is improving, but Debt to GDP is yet to be stabilized. Japan aims at Primary Surplus by 2020.

6 (Source) OECD “Economic Outlook 98”(November 2015)

0

30

60

90

120

150

180

210

240

2001 2006 2011 2016

(%)

Japan

Italy

France U.K.

U.S.

Canada

Germany

Expenditures Tax

Revenues,

etc.

Debt Service

23.6

73.1

Other

Expenditures

Primary

Deficit

62.3

10.8

Fiscal Balance Debt to GDP

(FY2016 Budget)

tril yen

-6.6 -5.8

-4.1

-3.3-2.9 -2.3

-2.1 -2.2 -2.3

-2.2 -1.7 -1.4

-1.1

-7

-6

-5

-4

-3

-2

-1

0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

-3.3

Primary Surplus Target

-12.4 trillion Yen

●

Benchmark : approx. -1%●

●:Economic Revitalization Case (Nominal: more than 3%, Real: more than 2%)

●:Baseline Case (Nominal: mid 1%, Real: less than 1%)

●

-6.5 trillion Yen

(FY)

(ratio to nominal GDP:%)

Japan has successfully halved the deficit by 2015. In coming years, however, growth alone is not enough.

(Note) Excluding the expenditures and fiscal resources for the recovery and reconstruction measures.

(Source) Cabinet Office 7

2010 2015 2020

Primary Balance of the Central

and Local governments

(Source) Cabinet Decision: Basic Policy on Economic and Fiscal Management and Reform (June 2015)

The Economic and Fiscal Revitalization Plan (2016 to 2020) (1) pursues realizing “Economic Revitalization Case”, and (2) implements fiscal measures below to achieve FY2020 Primary Surplus Target.

8 8

The government continues current pace of tight expenditure control in coming three years. (Total increase by FY2018 (real terms) is limited to 1.6 trillion yen, including 1.5 trillion yen for social security expenditures.)

Thorough reform will be implemented on social security programs and other expenditures according to Reform Timetable and Key Performance Indicators.

Progress toward primary surplus target of FY2020 will be reviewed at the

mid-point FY2018*. The government will consider to take, if necessary, additional measures on expenditure and/or revenue sides.

growth

expenditure

control

*High growth scenario and planned expenditure control together is expected to reduce the

primary deficit to around -1% in FY2018.

FY2016 Budget fully satisfies limits and conditions of the Plan.

Government continues careful debt management, and steadily advances fiscal consolidation according to “Economic and Fiscal Revitalization Plan”.

（The end of Sep 2015）

Insurance

and Pension

etc. 28.4% Banks etc.

28.4%

Bank of

Japan 30.3%

Household

1.4%

Foreigners 9.8%

General

Government

(ex Public

Pensions)

1.7%

Total \1,040 trillion

(≒$8.6 trillion)

JGB Shareholders

(Source) Bank of Japan, Bloomberg 9

-0.3

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

0.6

2014/10 2015/04 2015/10

10Y

5Y

2Y

(%)2014/12/1Aa3 → A1

（Moody's）

2015/9/16AA- → A+

（S&P）

2015/4/27A+ → A

（Fitch）

Negative Interest Rate

QQE2

Summary

10

Japan is getting out of deflation. Positive cycles of

“corporate earnings - investment” and “household income

– consumption” are developing.

Abe government is decisively propelling growth strategy,

including all needed structural reforms and social welfare

program reviews to improve Japan’s potential growth.

There is a good progress in fiscal consolidation. Reliable

plan is set, and steady implementation started.

The Golden Goose • Nutrition(capital)

• Exercise(structural reform)

• Discipline(fiscal consolidation)

(blank page)

Appendix

Background of Abenomics

13

FY2010

- 6.6%

FY2015

Cut 1/2 (- 3.3%)

FY2020

PB Surplus

Primary Balance / GDP Target Deflation

Nominal

GDP Growth Rate

- 1.3%

CPI

- 0.6%

Abenomics Three Arrows

Tax Revenues*

0.1%

(Average of 2009-2012)

*FY base

Bold monetary policy

→Joint statement with BOJ

→Price stability target

（inflation target（2％））

→Quantitative Qualitative

Easing (QQE)

Flexible fiscal policy →FY2012 supplementary

budget (10 trillion yen)

Growth strategy

→private consumption and

investment promotion

→structural reform

Achievement of Abenomics

14

Nominal GNI 488 trillion yen (FY2012, 4Q) → 525 trillion yen (FY2015, 4Q) Corporate Earnings 64.6 trillion yen (FY2014, record high)

Labor Market Job Opening-to-Application Ratio: 1.28 (Jan. 2016, highest in 24 years) Unemployment Rate: 3.2% (Jan. 2016) Wage Increase: 2.20% (2015, highest in 17 years)

Outward Direct Investment 94.0 trillion yen (2012) → 159.9 trillion yen (2014) Net External Assets 3.0 trillion dollars (2014, the best in the world)

Foreign Currency Reserve 1.2 trillion dollars (2014, 2nd in the world)

Inbound Tourists Number of tourists: 19.74 million (2015, record high) Expenditures by tourists: 3.4 trillion yen (2015, record high)

Agriculture Exports : 611.7 billion yen (2014, record high)

Energy Effectiveness Energy Consumption (manufacturer): 43% improvement (FY1973-2012) Expansion overseas of Japanese Companies 68,573 (Oct. 1, 2014, record high)

Women in Business More than one million increase (during Abe Administration) Proportion of women in management position: 6.9% (2012) → 8.3% (2014) Economic Effect of Tokyo Olympic 2020 Boost up real GDP growth by 0.2 - 0.3% annually (FY2015-2018) Increase in Tax Revenues 57.6 trillion yen (FY2016) (+ 13.7 trillion yen since Abe Cabinet started)

(Source) Cabinet Office, Bank of Japan

Society in which All Citizens are Dynamically Engaged (Abenomics’ new “Three Arrows”)

15 (Source) Cabinet Office

The 1st Arrow “A robust economy that gives rise to hope” Nominal GDP toward 600 trillion yen

• Increase in labor share by raising wages

• Expansion of private investment through revolution in productivity

• Increase in the labor participation rate through working-style reforms and improvement

in productivity through innovation

The 2nd Arrow “Dream-weaving Childcare Supports” Desirable birthrate of 1.8

• Stabilization of youth employment and improvement in working conditions

• An environment enabling balance of working with childcare

• Ceaseless supports in each stage from marriage, pregnancy, childbirth to childcare

including childcare services

The 3rd Arrow “Social Security that provides reassurance No one forced to leave their jobs for nursing care

• Securement of nursing services

• An environment enabling balance of working with nursing

• Consulting and supporting systems for families

• Extension of healthy life expectancy

Put a brake on the declining birthrate and aging population, and

maintain the population at 100 million people 50 years from now

-6

-4

-2

0

2

4

6

8

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

30

40

50

60

70

80

90

100

110

Real GDP Growth (left) Total Expenditure (right)

Tax Revenues (right) CPI (less fresh food, left)

（%, YoY）

(Source) Cabinet Office、Ministry of Internal Affairs and Communications、Minisry of Finance

（trillion yen）

Crocodile Mouth is Closing

16

17

Projection of Social Security Benefit

(Source) Ministry of Health, Labour and Welfare

Pension

53.8 trillion yen

Medical care

35.1 trillion yen

Long-term care 8.4 trillion yen

Others 12.2 trillion yen

Pension

60.4 trillion yen

Medical Care

54.0 trillion yen

Long-term care

19.8 trillion yen

Others 14.6 trillion yen

GDP 479.6 trillion yen

(FY2012)

Pension

1.12 times

Medical care

1.54 times

Long-term care

2.34 times

Total benefits

1.36 times

109.5 trillion yen

GDP 610.6 trillion yen

(FY2025) ＧＤＰ 1.27 times

148.9 trillion yen

Size of Government (OECD)

18

(as of FY2011)

(Source) OECD, EU, Cabinet Office

(expenditures and revenues are general government base)

(Some countries’ data are not released by OECD)

(as of FY2012)

Rate to GDP (%)Rank in

OECD members

Social Security

Expenditures25.3

11

29

Other

Expenditures14.8

29

29

Tax Revenues 16.8 32

34

【Reference】

Tax and Social Security

Contributions Ratio*

(Rate to NI)40.5

27

33

*Total taxes as a percentage of National Income (NI)

+ Social Security Contribution as a percentage of NI

19 (Source) Ministry of Finance

Expenditure

Expansion

Revenue

Decreasing

Contribution to Expenditure Expansion and Revenue Decreasing (FY1990=0)

Highlights of the Draft Budget for FY2016

20

Steady growth is expected

Real GDP growth rate: FY2016: 1.7%

→largely in line with the medium-term outlook

Increase in tax revenues

57.6 trillion yen (+ 13.7 trillion yen since Abe Cabinet started)

→exceeds the level of tax revenues before Lehman Shock (increase for 7 years in a row)

Adhering to Strict Expenditure Control

FY2016 budget limited expenditure increase to 530 billion yen (including social security

expenditure increase to 500 billion yen) by optimization of drug prices and other reforms

Reduction of the amount of newly issued government bonds

Newly issued government bonds: 34.4 trillion yen (- 2.4 trillion yen from the previous year)

→Reduction for 6 years in a row

Bond dependency ratio: 35.6%

→the lowest level after FY2008 (decrease for 6 years in a row)

Decline in Primary Deficit (not including local governments)

-10.8 trillion yen (+2.6 trillion yen from the previous fiscal year)

(Source) Ministry of Finance

21

Long-Term Fiscal Sustainability Analysis in Japan (Updated Edition)

Conducted long-term projections of Japan’s fiscal position toward FY2060 adopting the analysis method of European Commission, and found…

Fiscal System Council (Oct. 9, 2015)

Primary Balance gets worse after FY2021 and Gross Debt to GDP also increases and diverges due to

the increase of “the age-related expenditure” and etc., in case fiscal condition is not improved (no-

policy-change).

Continuing current pace of expenditure control (+1.6 tril yen / 3yrs) until FY2020 will eliminate the most

of PB deficit.

On top of this, necessary fiscal balance improvement for stabilizing Gross Debt to GDP ratio on and

after FY2060 is calculated as 5.6 - 7.3% of GDP (in case it is improved at a stroke in FY2020)

(including 2.7 - 2.9% of GDP for reducing PB deficit and covering expenditure increase for population

aging).

Consumption Tax

22

Purpose of the revenue resources：Social Security Expenditure

(pension, medical, Long-term care, child care)

Introduce multiple tax rate system in April, 2017

8%:①food and drinks excluding alcohol and those served at restaurants

②newspaper subscription fee

10%:other goods and services

For the necessary revenue of the reduced tax rate, tax reform bill

provides the following. ①Stable and permanent fiscal sources will be secured

②Further review will be made on consumption tax system and social security reform

based on the interim evaluation of the fiscal consolidation plan in FY2018

Raise the consumption tax rate from 8% to 10% on Apr. 1, 2017

Economic Situations (Impact of Last Consumption Tax Hike)

23 (Source) Cabinet Office

2012

3Q 4Q

2013

1Q 2Q 3Q 4Q

2014

1Q 2Q 3Q 4Q

2015

1Q 2Q 3Q 4Q

Private

Consumption

(%) -0.4 +0.2 +0.7 +0.9 +0.3 +0.1 +2.3 -5.0 -0.0 +0.6 +0.2 -0.8 +0.4 -0.8

Real GDP

Growth

(%) -0.5 -0.1 +1.0 +0.7 +0.5 -0.1 +1.2 -2.0 -0.6 +0.6 +1.0 -0.3 +0.3 -0.4

Consumption Tax Hike 5%8% (Change from the previous quarter, seasonally adjusted)

FY2014 FY2017

Interval 17 years

(FY1997～FY2014)

3 years

(FY2014～FY2017)

Tax Rate 5% → 8%

(+ 8.1 trillion yen)

8% → 10%

(+ 5.4 trillion yen)

Others ー Introduction of Reduced Tax Rates

(-1.0 trillion yen)

【Comparison of Consumption Tax Increase】

Consumption Tax Hike (approved by the Diet)

International Comparison of VAT

(Note1) Japan: national consumption tax rate of 6.3% and local consumption tax rate of 1.7%

(Note2) Canada: Provincial Sales Tax (PST) etc. are added to Goods and Services Tax (GST) in almost all states. e.g.; 8% in Ontario State

(Note3) U.S.: Sales Tax is imposed by each state, county, and city. e.g.; 8.875%in total of NY State and NY city

(Source) Ministry of Finance

27

25 25 25 2524 24 24

23 23 23 2322 22

21 21 21 21 21 2120 20 20 20 20 20

19 19 1918 18 18

17 1716

15

1312

10 10 108.875

8 87 7

5

0

5

10

15

20

25

30

Hungary

Denm

ark

Sw

eden

Cro

atia

Norw

ay

Fin

land

Rom

ania

Icela

nd

Gre

ece

Irela

nd

Pola

nd

Port

ugal

Italy

Slo

venia

Belg

ium

Czech R

epublic

Neth

erlands

Spain

Latv

ia

Lithuania

Austr

ia

Esto

nia

Fra

nce

Slo

vakia

United K

ingdom

Bulg

aria

Germ

any

Cypru

s

Chile

Malta

Isra

el

Turk

ey

Luxem

bourg

Chin

a

Mexic

o

New

Zeala

nd

Canada(O

nta

rio)

Phili

ppin

es

Austr

alia

Republic

of K

ore

a

Indonesia

U.S

.(N

Y)

Japan

Sw

itzerland

Sin

gapore

Thaila

nd

Taiw

an

(%)

24

BOJ’s QQE with Negative Interest Rate

25

(Source) Bank of Japan

※To support firms’ investment in physical and human capital.

BOJ will start selling stocks 0.3 trillion yen per year from FY2016

simultaneously.

○ JGB Market Impact

BOJ’s share 26.5% (Mar, 2015)→28.5% (Jun, 2015)→30.3% (Sep, 2015)

+0.1% same

as current interest

− Average

outstanding balance

of excess reserves

from Jan. to Dec.

2015

− A-(B+C)

‒ Outstanding of required reserves

‒ Outstanding of the BOJ‘s provision of

credit through the “Loan Support

Program” and the “Funds-Supplying

Operation”

− Outstanding balance calculated as a

certain ratio of (C)

Policy-Rate

Balance

Macro

Add-on Balance (B)

-0.1%

0%

Basic Balance

(C)

<23 tril yen>

<24 tril yen>

<206 tril yen>

< > : Test calculated amounts for January current account outstanding

(Source) Bank of Japan

Annual Pace of Increase Negative Interest Rate

QQE

(Apr.4 2013-)

About 60-70

About 50

(Average

maturity of

JGB

purchases)

About 7 yearsAbout 7-

10 years

About 1

About 0.03

-

Eligible

for

purchase

ETF About 3

J-REIT About 0.09

JPX-Nikkei

Index 400

(ETF)

About 0.3 ※

(from FY2016)

Long-term

BondsAbout 80

About 7-12 years

(from CY2016)

Expansion of QQE

(Oct.31 2014-)

Supplementary

Measures for QQE

(Dec.18 2015-)

Monetary

baseAbout 80

(trillion yen)

Overview of Primary JGB Market

Total

Issuance

162.2 trillion yen

FILP Bonds FILP

16.5 trillion yen

Budget Newly Issued Bonds

Refunding Bonds

34.4 trillion yen

109.1 trillion yen

Construction Bonds 6.1tril.

Special Deficit-

financing Bonds 28.4tril.

Breakdown by

Legal Grounds

Coupon-bearing

Bonds

T-Bill

129.2 trillion yen

33.0 trillion yen

40Y Bond 2.4 tril.

30Y Bond 9.6 tril.

20Y Bond 13.2tril.

10Y Bond 28.8tril.

5Y Bond 28.8tril.

2Y Bond 27.6tril.

For Retail

Investors 2.0tril.

etc.

Reconstruction

Bonds

2.2 trillion yen

General Bonds

（注）計数は２７年度当初予算ベース

※ Refunding Bonds are issued so that redemption is completed in

60 years with regard to Construction Bonds and Special Deficit-

financing Bonds.

145.7 trillion yen

26

※

Breakdown by

Issuance Type

(Source) Ministry of Finance

(FY2016)

Outstanding Amount of JGBs

27 (Source) Ministry of Finance

12.9 75.2

187.4 236.9 224.9 238.3 246.3 248.3 249.9 260.1 270.3 274.9

2.1

59.2

107.8

304.5 321.0 355.6

390.0 410.9 442.2

471.6 500.8

529.3 551.0

10.7

10.3 9.0

8.3

7.8

7.6 2.6

5.2

4.9

4.6 4.4

139.8 131.1

122.2

118.2110.9

109.3

104.299.0

96.893.8

15.0

134.4

295.2

681.2 677.0 716.2

754.5

780.8 814.3

848.1 873.1

908.9 931.6

0

100

200

300

400

500

600

700

800

900

1,000

1975 1985 1998 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016(at the end of FY)

FILP BondsSpecial Bonds for covering Public Pension FundingReconstruction BondsSpecial Deficit-Financing BondsConstruction Bonds

(Note1) Figures may not sum up to total because of rounding.(Note2) Up to FY2014: Actual figures, FY2015 - FY2016: Estimates(Note3) Special Deficit-Financing Bonds include the Refunding Bonds which were issued as a result of takeover of the debt transferred from other accounts.

(trillion yen)

774.1

743.9705.0

669.9636.3

594.0545.9

General Bonds837.8

541.5

812.1

258.0

3.7 3.0 2.6 2.0

5.3 5.26.8

9.611.3

6.3 6.8 7.610.0

11.610.911.811.610.811.711.512.012.313.1

(13.3)(13.7)

10.910.710.8

10.8

10.810.7

10.9

10.6

10.1

9.5 8.8 7.9

7.5

7.17.1

7.5 7.67.7

7.9 8.1 8.0 8.18.3

(8.8)

(9.9)

20.8%

18.3%

18.2%

16.9%

20.4%

20.3%

21.0%

22.8%

24.0%

18.7%18.6%18.9%

20.6%

21.9%22.1%

23.6%

22.6%

18.3%

20.5%

19.5%

20.6%20.4%

21.7%

(23.0%)

(24.4%)

0.0

5.0

10.0

15.0

20.0

25.0

30.0Interest Payments

Redemption of the National Debt

National Debt Service / Total Expenditures (%)

(trillion yen, %)

ActualBudget(2015:supplementary)

(2016:initial)

(FY)

Historical Changes in Debt Service

28

Assumption interest rate

1.6% / 10Year

(Source) Ministry of Finance