JGBs and national wealthDespite the overwhelming amount of national debt, Japan has not yet experienced a sovereign debt crisis. This is mainly because the JGBs are issued in yen by the central bank, the Bank of Japan, and the debt is mostly held by domestic investors. Over 92 percent of the outstanding national bonds are owned by the Bank of Japan and national investors as of 2021. Therefore, Japan adjusts interest at comparatively low rates and runs less risk of defaulting in comparison to countries whose debts are primarily held by foreign investors.
Additionally, Japan holds a high amount of financial and non-financial assets. As of 2020, the net worth of Japan was nearly 3.7 quadrillion yen, representing a five-year consecutive increase. Japan also possesses the highest amount of net external assets, ranking first in the world for the last three decades. Thus, Japan holds a sufficient amount of national wealth to buffer a financial crisis. Nevertheless, with the decreasing and aging population along with the lingering effects of the COVID-19 pandemic and crude oil price increases, debt management will continue to be a major issue for the Japanese government and economy.