($1 = 131.6600 yen) (Reporting by Kantaro Komiya and Tetsushi Kajimoto; Editing by Himani Sarkar and Jamie Freed)
(Adds detail, context)
By Kantaro Komiya and Tetsushi Kajimoto
TOKYO, Feb 10 (Reuters) - Japan's outstanding government
debt topped 1,000 trillion yen ($7.60 trillion) for the first
time, Ministry of Finance data showed on Friday, stoking
concerns over runaway debt as the list of spending priorities
from the military to childcare expands.
The heavily-indebted government has prioritised near-term
economic growth over fiscal reform. Its response to the COVID-19
outbreak included massive stimulus measures that strained public
debt, which is more than double the size of the economy.
As a result, the outstanding balance of general bonds, which
includes regular short- to long-term maturities but excludes
other types of debt such as agency bonds, stood at 1,006
trillion yen at end-December, according to the ministry's
quarterly data.
The market is closely monitoring any signs of change in the
Bank of Japan's (BOJ) ultra-loose monetary policy that could
lead to big impacts on Japan's ballooning debts and interest
payments.
The benchmark 10-year bond yield almost
doubled in December after the BOJ's surprise announcement that
widened the long-term yield cap range.
Further rises in long-term rates would send alarm-bells
ringing on public debt because it pushes up debt-servicing
costs.
A decade of BOJ's ultra-loose policy under Governor Haruhiko
Kuroda has helped sustain Japan's finances at the cost of fiscal
discipline, because it kept borrowing costs low.
Despite the snowballing public debt, Japan is aiming to
double its defence budget over the next five years to counter
threats from China and North Korea. It also plans to boost
childcare spending to reverse a downturn in the birth rate.
Japan is struggling to achieve even a narrow budget balance
target by the fiscal year 2025 because the primary budget, which
excludes new bond sales and debt-servicing costs, remains in the
red.
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