November 9, 2018

985000Japan
Chief Analyst
xxxxx Analyst

Atsushi Masuda
Shinichi Endo

Long-term Rating

AAA

Outlook*

StableShort-term Rating-*Long-term Rating refers to Foreign Currency Long-term Issuer Rating in principle.

thirds majority (310 seats) needed to propose aconstitutional amendment (under the fourth Abe
Cabinet). On the other hand, the Democratic Party, thelargest opposition force, had split up into the Party of
Hope and the Constitutional Democratic Party of Japan(CDP) before the general election. In May 2018, theDemocratic Party and some members of the Party of
Hope joined together to form the Democratic Party for
the People (DPFP). Given such a divided opposition
camp, the ruling collation will continue to retain its
stable political base unless it makes a fatal gaffe.
In September 2018, LDP held its once-every-threeyears presidential election and elected Abe for a third
term. The Abe administration entered its last three-year
term of the maximum nine-year term of office permitted
by the party rules. Nearly six years have passed since theinauguration of his first administration in December
2012 and it may continue until September 2021 when
the term of the presidency expires. Abe reshuffled his
Cabinet in October 2018 following his election as LDP
president (the fourth Abe Cabinet and the first
reshuffled Cabinet). While it should be noted some
harmful effects may emerge from s long-term
government, JCR will watch whether the Abeadministration will continue to carry out its economic
structural reforms by taking advantage of its stable
political base.

1. Overview and sociopolitical conditions
Japan had a nominal GDP of USD 4.9 trillion in 2017,
ranking third in the world after the United States andChina, with its per capita GDP reaching USD 38,440. It
had a total population of 127 million, the 10th largest in
the world (IMF World Economic Outlook).
The current administration of Prime Minister Shinzo
Abe (the second Abe Cabinet) was inaugurated in
December 2012 as a coalition of the Liberal Democratic
Party (LDP) and New Komeito Party. Immediately after
its inauguration, the administration launched what it
called "Abenomics" composed of three arrows:
aggressive monetary policy, flexible fiscal policy andgrowth strategy to stimulate private investment. It has
made clear its stance of putting priority on economic
policy aimed at overcoming deflation. Amid a steadyeconomic growth, the government has been enjoying ahigh approval rating in excess of 50% except for somebrief periods against the background of a stableadministration management and a decline in thepresence of the opposition alliance.
A spate of misconducts within the administration
surfaced in 2017, and the management of thegovernment by Prime Minister Abe became temporarily
unstable in the face of a scathing attack by the
opposition parties. However, in August 2017, Abe
reshuffled his cabinet (the third Abe Cabinet and thethird reshuffled Cabinet) in a bid to bolster its approval
ratings and dissolved the House of Representatives atthe beginning of the extraordinary Diet session in
September. In the general election held in October 2017,
the ruling coalition of LDP and the New Komeito Partywon 313 seats (down five seats), surpassing the two-

2. Economic base(1)

Economic expansion under Abenomics will belongest in postwar period
The Japanese economy grew 1.6% in FY2017 in real
GDP terms (the second preliminary report for the AprilJune quarter of FY2018), driven by domestic demand<1>Issuer Report
centering on private-sector capital investment andexternal demand. Growth accelerated from 1.2% in theprevious year.
Under Abenomics that began in December 2012,
annual growth rates in real GDP terms averaged 1.3% in
FY2013-17. It exceeded the potential growth rateestimated by the Cabinet Office (1.1%) and the annual
average growth rate (1.2%) logged under the Koizumi
administration (2001-06) and the first Abeadministration (2006-07) in the 2000s. It is highly likelythat the current economic expansion will continue for 74
months until January 2019, outperforming the longest
postwar growth period of 73 months registered in the
2000s.
The consumption tax rate in Japan is scheduled to beraised from the current 8% to 10% in October 2019. As
demand declined significantly when the rate wasincreased from 5% to 8% in April 2014, there is concernthat the next hike may also have some adverse impact
on the economy. However, given that (i) the increase thistime is 2%, or smaller than the previous 3%, (ii) the
introduction of a reduced tax rate regime may help easehousehold financial burdens and (iii) the government
will be introducing a wide range of measures aimed tosmooth out last-minute demand boost and its
contraction, JCR does not think the economy will stall asa result of the tax rate hike. In fact, the Bank of Japan(BOJ) in April 2018 estimated the net financial burden on
households from the tax hike at JPY 2.2 trillion, muchsmaller than the JPY 8.0 trillion in the previous tax
increase in April 2014.
A comparison of the performance of each demand
component relative to real GDP growth under thesecond Abe administration during FY2013-17 with thatof the Koizumi administration and the first Abeadministration in the 2000s shows that the contribution
by private non-residential capital investment was+0.5ppt in FY2013-17, well exceeding +0.2ppt in the
2000s. This demonstrates that corporate activity has
been particularly buoyant in the latest economic
expansion. In fact, corporate profits soared to record
highs (ordinary income based on the Financial
Statements Statistics of Corporations by Industry).
Private non-residential capital investment exceeded JPY
90 trillion in the second quarter of 2018 on an SNA basis
to reach JPY 91.5 trillion, eclipsing the previous record
high available since 1994. Amid upbeat corporate
activities, the employment environment turned
increasingly tight, with the unemployment rate declining
to 2.2% in May 2018 and the job openings-to-applicantsratio reaching 1.63 in July 2018, the highest in 44 years.
On the other hand, contribution by private final
consumption expenditure, which normally accounts fornearly 60% of GDP, was +0.3 ppt under the second Abeadministration, falling by half from +0.6 ppt in the 2000s.
One of the major factors behind for the bleak private
consumption is a decline in the labor share. The labor
share dropped to less than 60%, indicating that therecord-high corporate profits did not sufficiently seeped
into individual households. In particular, a setback in the
average propensity to consume among young people(Household Survey) was prominent. Structural problems,such as the declining birthrate and the aging populationand the consequent increase in uncertainty about the
future, seem to be depressing consumer spending,especially among the younger generations. The contrast
between robust corporate activity and weak consumer
spending characterizes the economic growth under
Abenomics.
(2) Effects of growth strategies on potential growth
In the concept of growth accounting, the potential
growth rate can be broken down into the coreproductive factors of labor and capital and the totalfactor productivity (TFP). According to an estimate by
the Cabinet Office (based on the second preliminary
report for the April-June quarter of 2018), the potential
growth rate rose from 0.8% in the fourth quarter of 2012
when the Abe administration started to 1.1% in thesecond quarter of 2018, a 3ppt gain over the last fiveand a half years. The breakdown shows that capital input
and labor input, which both negatively contributed tothe potential growth rate in the fourth quarter of 2012,
turned positive in 2014. Thereafter, their positive
contributions widened moderately, giving a modest push
to the potential growth.
Behind this background were the measures taken by
Abe administration to expand capital investment andpromote labor participation by females and the elderly
under the growth strategy it first formulated in 2013 andrevised annually thereafter. In fact, an annual increase of
JPY 70 trillion in capital investment (revised to JPY 80
trillion in FY2015), which was the key performanceindicator set in the first year of Abenomics in FY2013,
was achieved, actually reaching JPY 87 trillion in FY2018.
As to the employment rate for females and the elderly,
the KPI was set at 77% for females aged 25-44 and 67%
for both males and females aged 60-64 to be attained by
2020. The former stood at 74.4% and the latter at 66.2%
in 2017, coming closer to the targets.

<2>

Issuer Report
However, much cannot be expected of contribution
by labor as the "working-age population" defined as theone aged 15-64 will keep decreasing in the future. With
regard to capital, the growth rate of capital stock has
declined in keeping with its accumulation over the years
and its contribution to growth is unlikely to turnsignificantly positive.
In such situation, a rise of total factor productivity is
indispensable for a sustained enhancement of thepotential growth rate. However, total factor productivity
has been on a declining trend. The estimate by the
Cabinet Office shows that its contribution to the potential
growth rate dropped by half between the fourth quarterof 2012 and the second quarter of 2018. In the "Basic
Policies for Economic and Fiscal Management and Reform
2018" (the so-called "Basic Policies"), which was approvedby the Cabinet in June 2018, the Abe administration
clearly stated its policy of advancing reforms on two
wheels of "Human Resource Development Revolution"and "Productivity Revolution". JCR will watch whether thegovernment initiatives will lead up to sustained
improvement of the potential growth rate.

3. Fiscal base(1) PB deficit narrowed and newly-issued bonds declined
Japan's outstanding balance of government bonds
and borrowings (referred to as "government debt" inthis paper) totaled JPY 1,087.8 trillion at the end of
FY2017, equivalent to 198.3% of GDP, the highest in theworld in terms of debt-to-GDP ratio. The main cause of
the swollen government debt was the continuing deficit
in the primary fiscal balance (PB). The PB deficit is inprinciple covered by the issuance of government bonds(newly-issued bonds). The government debt swelled due
mainly to the accumulation of newly-issued bonds amid
the continuing PB deficit *1.
Primarily responsible for the persistent PB deficit is the
expansion of social security-related expenditures
necessitated by the progress in the aging of population.
There are only two options to control the PB deficit: toincrease tax revenues or reduce total expenditures. Under
the Abe administration, the PB deficit of the central
government has been shrinking on increased tax revenues
and restrained expenditures. The deficit is expected tocontinue shrinking from JPY 20.0 trillion in FY2016 (final
result) to JPY 18.7 trillion in FY2017 (revised budget) and
JPY 15.3 trillion in FY2018 (initial budget).

If the PB deficit persists, however, the government
will have to continue to rely on newly-issued bonds,
which will further increase its debt outstanding. An
unabated debt accumulation adds to concerns about thesustainability of government debt on a stock basis. If theoutstanding balance of newly-issued bonds accumulates
as a result of the persistent PB deficit, the demand forissuance of refinancing bonds will also increase, which inturn will lead up to greater risks of annual debt rollover.
For this reason, JCR believes that it is important toswiftly turn a PB deficit into a surplus (see the next
section for JCR's evaluation of the government's fiscal
consolidation plan).
The annual issue amount of JGBs, including the
aforementioned newly-issued bonds and refinancing
bonds, has been on a decreasing trend since peaking out
at JPY 176.2 trillion (35.7% of GDP) in FY2012 and is
expected to fall to JPY 156.1 trillion (28.5% of GDP) in
FY2017 (revised budget) and JPY 149.9 trillion in FY 2018
(initial budget). The main factors behind the decline
were the reduced volume of newly-issued bonds
resulting from the shrinking PB deficit and the decline inrefinancing bonds made possible by the longer average
maturity of JGBs under the environment of low interest
rates. Nevertheless, according to the IMF Fiscal Monitor(April 2018), total financing needs of the maturing debt
of the Japanese government for CY2018 (based on IMF
estimates; debt is as defined by IMF) are 37.2% of GDP,
which is substantially higher those of the US (18.7%),
France (10.4%), the UK (6.7%) and Germany (5.0%). In
the event of a major shock in Japan's capital markets,
the financing risk of government bonds including
refinancing bonds is considerably higher than that inother developed countries. The large-scale monetaryeasing by BOJ is expected to enter a phase toward anexit sometime in the future. Accordingly, there could begreat pressure on the capital market, such as a sharp risein interest rates, during the run-up period to the exit,
and this point needs to be closely watched.
(2) The new fiscal consolidation plan increased thepossibility of fiscal reconstruction
Under its "Plan to Advance Economic and Fiscal
Revitalization" adopted by the Cabinet in June 2015, theAbe administration has been implementing fiscal
management by setting a target of turning around the
PB of central and local governments into surplus by
FY2020. However, the "New Economic Policy Package"*1 Primary fiscal balance (PB) is referred to as "tax revenues minus policy expenditures" in this paper as defined by the
Ministry of Finance of Japan. Policy expenditures are defined as total expenditures minus government debt service.
<3>

Issuer Reportformulated in December 2017, which included a change
in the use of increased revenues from the consumption
tax rate hike to 10%, made the target harder to achieve
in FY2020. Accordingly, in June 2018, the Abeadministration adopted its "New Plan to Advance
Economic and Fiscal Revitalization" as a new fiscal
consolidation plan. This plan firmly retained the surplus
target itself but postponed the timing of achieving it by
five years from FY2020 to FY2025.
JCR has considered the government's target ofachieving a PB surplus as a core element imperative torestoring fiscal discipline. Yet, it will be premature to judge
that the government's commitment to fiscal consolidation
has receded simply because of the five-year
postponement. Rather, it is crucial to assess thegovernment's commitment by judging whether thefeasibility of fiscal consolidation has increased as a resultof the formulation of the new plan, including the
postponement of the target date, as compared to the oldplan.
It should be noted in this respect that theassumptions for the "Economic and Fiscal Projections for
Medium to Long Term Analysis" (hereinafter referred toas the medium and long-term fiscal estimates) by the
Cabinet Office based on the new plan have been
appreciably changed. The Cabinet Office submits such
estimates to the Council on Economic and Fiscal Policy
twice a year in January and July to provide datanecessary to review the progress on fiscal consolidationand measures to be taken to achieve the target. Notablehere is that the Cabinet Office drastically lowered theassumptions for growth and inflation rates in its
estimated in January 2018, making them closer to thereality of the economy.
In addition to changing the economic assumptions,
the Office revised the pace of PB deficit reduction to be
more realistic. The July 2017 medium and long-term
fiscal estimates ("Economic Recovery Case") based on
the old plan had estimated the PB deficit at JPY 8.2
trillion (1.3% of GDP) in FY2020, saying it would turn intoa surplus in FY2025. In order to achieve the PB surplus in
FY2020 under this scenario, it would have beennecessary to reduce the deficit by more than 1% of GDP
on a cumulative basis by that year. A reduction of the
deficit at such pace might seriously impair economic
growth. On the other hand, the July 2018 medium andlong-term fiscal estimates ("Economic Growth Case")based on the new plan estimated the PB deficit at JPY
2.4 trillion in FY2025 (0.3% of GDP) and predicted theachievement of a surplus in FY2027. Under this scenario,

the new target of achieving a PB surplus in FY2025 will
be achievable with the efforts to reduce the deficit byonly 0.3% of GDP
The latest medium and long-term estimates showed
that, even on the more realistic economic assumptions,the debt-to-GDP ratio will steadily decline after peaking
in FY2018. JCR also estimates that if the pace ofeconomic growth and deficit reduction under
Abenomics is generally sustained in the future, the debtto-GDP ratio will remain stable at the current level until
around FY2020 and then gradually decline.
Taking these points into consideration, the new plancan be regarded as one aimed to strike a balance
between fiscal consolidation for the reduction of theswollen debt and a fiscal policy in favor of economic
growth. JCR judged that the feasibility of medium-to
long-term fiscal consolidation was higher than that of
the old plan, and that the government's strong
commitment to fiscal consolidation was still maintained
under the new plan. The reform schedule of the new
fiscal soundness plan is scheduled to be formulated by
the end of 2018. The JCR will closely monitor the
progress and implementation of fiscal consolidation,
including its detail.

4. Financial system
Under the framework of its Quantitative andQualitative Monetary Easing (QQE) introduced in April
2013, BOJ is aiming to achieve a price stability target of
2%. Negative Interest Rate Policy (NIRP) was introduced
in January 2016, and a Quantitative and Qualitative
Monetary Easing with Yield Curve Control was
introduced in September 2016. However, at its Monetary
Policy Meeting held in July 2018, BOJ lowered its
forecast for prices, predicting that the CPI inflation is
expected to be 1.6% year-on-year in FY2020, excluding
the effect of the planned consumption tax hike, and thatthe 2% target will not be achieved during the forecast
period. It also deleted the reference to FY2020 as a
specific date for achieving the 2% price stability target.
This implied that BOJ's large-scale monetary easing may
continue at least until FY2021.
In its Outlook Report released after the Monetary
Policy Meeting in July 2018, BOJ presented the results of
its analysis that factors such as a cautious stance on
setting wages and prices on the part of companies and apersistently cautious attitude toward future priceincreases on the part of households are jointly
responsible for the continued weakness of prices relative<4>

Issuer Reportto the economic and employment situation. Accordingly,
BOJ decided at the meeting on "Strengthening the
Framework for Continuous Powerful Monetary Easing".
It introduced a forward guidance on the policy interest
rate, deciding to maintain the current extremely low
levels of short- and long-term interest rates for an
extended period of time. On the other hand, as to its
yield curve control, BOJ added a new statement that"with regard to the amount of JGBs to be purchased, theBank will conduct purchases in a flexible manner so that
their amount outstanding will increase at an annual paceof about 80 trillion yen".
In this regard, BOJ's actual outright purchases of longterm JGBs totaled JPY 49.3 trillion in FY2017, which wasconsiderably lower than its projected purchase increaseof approximately JPY 80 trillion per year. JCR estimates
the purchases will decline to around JPY 30 trillion in
FY2018. Meanwhile, the outstanding balance of JGBs
held by BOJ stood at JPY 447.4 trillion at the end of
FY2017. According to the Flow of Funds Accounts, BOJ's
JGB holdings ratio reached 42.3% at the end of June
2018. In fact, a working paper released by BOJ in
October 2018 showed the results of its estimate
indicating that its JGB purchases had an extremely
strong downward pressure on interest rates.
However, looking at the actual rate of inflation, thecore inflation rate of the consumer price index, which
BOJ set as a major price index, was only 0.9% year-onyear in August 2018. In particular, non-energy items had
little impact on the price inflation. While BOJ's monetaryeasing thus far has contributed to improving the supplydemand gap through a fall of real interest rates, theactual pace of inflation has fallen considerably short ofits expectations, and the expected inflation rate, which
BOJ sees as an important path to inflation, has been
consistently sluggish. Consequently, it must be said thatthe path to achieving the BOJ's 2% price target is still along way to go.
In contrast, long-term interest rates have beensteadily rising since BOJ's Monetary Policy Meeting inJuly 2018 amid the widespread market view that the
Bank has decided to allow interest rates to rise. In fact,
at a press conference after the Meeting, Governor
Haruhiko Kuroda indicated that he will tolerate the longterm interest rates to go up to a maximum of around
0.2%. The rates actually rose to around 0.15% at one
point in mid-October 2018.
A major factor behind the shift in BOJ's stance wasfalling profits in the banking sector. According to the
Financial Services Agency, the net business profits of 549

depository institutions totaled JPY 3.8 trillion in FY2018,
down 37.7% from JPY 6.1 trillion in FY2015 before theintroduction of NIRP. Given that BOJ's large-scalemonetary easing is expected to continue at least until
FY2021, there is no denying that regional banks withrelatively inferior profitability will see their financial
intermediation functions undermined unless theybolster their incomes. This indeed requires prompt
measures to be taken. On the other hand, thecontinuation of low interest rates has produced asecondary effect of curbing interest payments in fiscal
aspects. According to the Ministry of Finance, theweighted-average yield on general government bonds
kept declining, falling below 1% to reach 0.95% at theend of FY2017. While outstanding JGBs grew 28.6% to
JPY 241.7 trillion over the past 10 years from FY2007 to
FY2017, interest payments increased only 16.1% to JPY
1.2 trillion during the same period.
Given the above, BOJ has entered a difficult phase
where it has to strike a balance between retaining theeffect of monetary easing through outright purchases of
JGBs and expanding the allowable range of interest rate
fluctuations to stem the adverse effects such asdeteriorating profitability of financial institutions. At its
Monetary Policy Meeting held in July 2018, BOJ took
seemingly contradictory decisions to adopt a forward
guidance that promises ultra-low interest rates on one
hand and buy JGBs in a flexible manner on the other.
This seems to indicate the growing difficulties the bankfaces in steering its monetary policy in such a phase.
Seen from a global perspective, differences in the
stance of monetary policy among Japan, the UnitedStates, and Europe are becoming clearer. While Japan is
expected to continue its large-scale monetary easing atleast until the end of FY2020 as seen above, the U.S.
Federal Reserve began raising interest rates in December
2015 and the ECB decided to terminate its asset
purchase program at the end of 2018.
If the United States and Europe were to take the leadin normalizing their monetary policy, a widened interest
rate differential would bring about a depreciation of the
yen and benefit the Japanese economy under normal
circumstances. However, in the event of a global
economic downturn, Japan has little room for
manipulation of interest rates under conditions where
the monetary policy has not been normalized and will
have to go deeper into non-traditional monetary easing
measures. If the United States and Europe turn tomonetary easing in response to the global economic
downturn, the yen's appreciation resulting from the<5>Issuer Reportnarrowing interest rate differential between the UnitedStates, Europe and Japan may have a negative impact on
the Japanese economy, such as a setback of exports. It
should be noted that BOJ may lose its freedom ofmonetary policy amid market volatility resulting fromthe sharpening difference in the financial stance among
Japan, the United States and Europe.

assets by investing the chronic current account surplus
for many years in foreign countries, and its external
position is extremely firm and stable.

6. Overall assessment and outlook

5. External position
Japan's current account has been chronically in thesurplus. However, against the background of thesuspension of all nuclear power plants in Japan following
the Great East Japan Earthquake in 2011, its goods tradebalance slipped into deficit in FY2011 on increased fuelimports and its current account surplus shrank to JPY 2.4
trillion or 0.5% of GDP in FY2013. The goods tradebalance bounced back to post a modest surplus in
FY2015 partly because crude oil prices fell sharply fromthe middle of 2014. In addition, as more Japanesecompanies accelerated their overseas expansion sincethe 2000s, a primary income balance surplus has kept its
uptrend mainly on increased investment income fromoverseas. These helped to revive the current accountsurplus, which in FY2017 reached JPY 21.8 trillion or
4.0% of GDP to recover the level in FY2007.
On the financial account, net assets have kept
increasing since FY2014. In the first place, net assets inthe direct investment account continued to steadily
increase amid outward investments constantly in excess
of inward investments. In FY2017, direct investment
registered an increase in net assets equivalent to 2.6% ofGDP. Other components of the financial account generally
stayed volatile, but the portfolio investment accountended the year with an increase in net assets equivalent
to 1.2% of GDP on a solid growth of outward investment
in equities and medium- to long-term bonds. Other
investments resulted in an increase in net liabilities
equivalent to 1.0% of GDP while the repatriation ofJapanese funds as seen in FY2015 seemed to have ended.
As of the end of June 2018, the amount of net
external assets stood at JPY 325.6 trillion (primaryestimate by the Ministry of Finance) or equivalent to59.3% of GDP, of which official reserve assets totaled JPY
137.6 trillion. Japan's net external assets wereequivalent to USD 2.9 trillion, the largest in the world,and Japan's lead was overwhelming; according to IMF
statistics as of the end of March 2018, Germany ranked
second at USD 2.3 trillion and China third at USD 1.8
trillion. Japan has abundantly accumulated its external<6>

The ratings mainly reflect the country's highly
advanced economic structure, its position as the world's
largest net external creditor, holdings and purchases ofgovernment bonds by domestic investors in a stablemanner against the backdrop of ample householdsavings, moderate economic recovery and ongoing
momentum of an exit from deflation, and continued
implementation of economic policy measures aimed at
fiscal consolidation and economic growth. The economic
growth under the Abenomics has exceeded JCR's earlier
forecast and has now reached a level faster than thatduring the economic expansion in the 2000s. Steady tax
revenues are expected to continue going forward amid amoderate economic expansion. With the Bank of Japan's
large-scale monetary easing expected to remain in force
for a while, JCR holds that the interest payments of thegovernment will be kept suppressed amid continuationof low interest rates. In its new fiscal consolidation planannounced in June 2018, the government postponed thetarget date for achieving a primary fiscal surplus by five
years. However, JCR believes that the debt-to-GDP ratio
will either stay stable or slowly decline even at the more
realistic pace of deficit reduction in favor of economic
growth. The feasibility of fiscal consolidation has rather
increased under the new plan as compared to theprevious one, although it is true that the hugegovernment debt stemming from chronic fiscal deficits
continues to put downward pressure on the ratings.
These have led to JCR's judgement that uncertainty overmedium- to long-term fiscal sustainability has now
receded. In light of the above, JCR has retained its
ratings and changed its outlook from Negative to Stable.
In the future, JCR will pay attention to the following
points: (1) whether the promotion of the growthstrategy based on the firm leadership of the government
will pave the way for enhancement of the potential
growth rate; (2) whether the reduction of the primarybalance deficit and the government debt-to-GDP ratio
will proceed as planned on the basis of the reformschedule formulated under the new fiscal consolidation
plan; and (3) whether BOJ's monetary policy can sustain
the monetary easing effect while taking into consideration
the adverse effects of low interest rates, such as thedeterioration of the financial intermediation function.

Issuer Report

985000Japan● Selected Economic Indicators(%)

FY2013

FY2014FY2015FY2016FY2017

Real GDP growth

2.6

-0.3

1.4

1.2

1.6

CPI Inflation (core, annual average)

0.8

2.8

-0.0

-0.2

0.7

Central government primary fiscal balance to GDP

-3.6

-3.1

-2.0

-1.6

-2.0

Central government overall fiscal balance to GDP

-7.8

-7.3

-6.1

-5.7

-6.0

outstanding of government bonds and borrowings to GDP

202.1

203.2

196.5

198.7

198.3

Current account balance to GDP

0.5

1.6

3.5

3.9

3.7

Trade balance to GDP

-2.1

-1.3

0.1

1.1

0.8

Financial account balance to GDP

-1.1

2.5

4.5

4.6

3.2

Official reserve assets (USD trillion)

1.3

1.2

1.3

1.2

1.3

Net external assets to GDP

63.2

66.4

65.4

60.4

57.0

Foreign exchange rate (annual average) (JPY/USD)

97.6

105.9

121.0

108.8

112.2

Monetary base, annual increase

50.6

34.5

27.0

19.0

8.9

Money stock, annual increase

2.9

3.0

2.5

3.5

2.6

Short-term interest rate

0.1

0.1

0.0

-0.1

-0.1

Long-term interest rate

0.7

0.5

0.3

-0.0

0.0

* Figures for the most recent period could be indicators based on preliminary figures.
(Notes)1 Primary fiscal balance = tax revenues minus policy expenditures.
2 Tax revenues = tax revenue plus other revenue.
3 Policy expenditures = total expenditures minus government debt service.
Source: Ministry of Finance, Bank of Japan, and Cabinet Office● Ratings(millions of yen)

RatingOutlook*AmountRate (%)

Issue Date

Maturity Date

Release

Foreign Currency Long-term Issuer Rating

AAA

Stable----2018.08.09

Local Currency Long-term Issuer Rating

AAA

Stable----2018.08.09● History of Long-term Issuer Rating(Foreign Currency Long-term Issuer Rating or its equivalent)

Date

RatingOutlook*

Issuer

2000.10.31

AAA

2002.06.12

AAA

NegativeJapan

2006.08.28

AAA

StableJapan

2016.07.14

AAA

NegativeJapan

2018.08.09

AAA

Stable

Japan

Japan

*Outlook for Foreign Currency long-term issuer rating, or direction in case of Credit Monitor<7>Issuer ReportJapan Credit Rating Agency, Ltd.
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