Japan's central government debt and general government debt are not the same number

Japan's headline figure is central government debt

The Japan ticker on WorldRealDebt takes as its headline the central government debt that the Ministry of Finance releases each month. That measure covers government bonds, financing bills, and borrowings. Its appeal is that it is an official series, citable and refreshed often.

Its coverage, though, differs from the general government debt that turns up in international tables. General government takes in a wider slice of the public sector, the social security funds included. Line the figure on Japan's page straight up against IMF or OECD rankings, then, and you invite a reading error.

Why Japan can look different even with a high ratio

Japan's debt-to-GDP ratio is very high, yet many argue that the ownership of its bonds and its monetary setup soften the risk. A large share of the bonds is held by domestic investors, the Bank of Japan, and financial institutions, and the fact that the debt is denominated in yen lowers the kind of risk that touches off a currency crisis.

Low currency risk, however, does not amount to low fiscal risk. Once an ageing population, social security spending, years of sluggish growth, and the normalisation of interest rates pile up at once, interest costs and the burden of rolling debt over can grow heavier as time passes.

The strengths and limits of a central government measure

Central government debt is updated quickly and ties straight into domestic policy debate, which makes it a fitting yardstick for a real-time ticker. Check the Ministry of Finance reporting date and the interpolation formula, and you can see exactly how the current estimate was put together.

Its limit is that it cannot show, at a single glance, the burden carried by the whole public sector. That is why Japan's page keeps coming back, in its FAQ and on its sources page, to the gap with general government debt. Accuracy of definition counts for more here than a crisp-looking number.

Principles for making comparisons

Korea's D1 and Japan's central government debt both sit close to a narrow measure of government debt, yet they are not quite the same construct. Neither lines up with America's total public debt, nor with Spain's EDP debt. A comparison page has to spell that difference out.

When you cite a Japanese debt figure, you have to state whether it is "central government debt" or "general government debt." Drop that one line, and conflicting ratios for one and the same country start to look as if they contradict each other.

So a Japanese figure should be read for its coverage, its holders, its currency, and its maturity structure rather than for its size alone. Miss those four, and you lose both the warning that a high debt ratio sends and the cushioning that is peculiar to Japan.