Warnings that Japan’s public finances are in crisis have been repeated for about 30 years. Indeed, a 1997 Tax Commission document described the situation at the time as “critical.” Yet the government has continued to borrow and provide public services. What has accumulated in the meantime? First, I will put the country’s large, complex financial figures into a form we can read.

Government accounting uses many specialized terms, but we can start as we would with a company’s financial statements: set out assets and liabilities and check the difference. We then look, step by step, at what cancels out and what remains when the Bank of Japan and local governments are included, and finally when households and private businesses are included as well.

First, decide what “the government” includes

Figures change depending on whom we count when we say “the government has assets” or “government debt is large.” For a company, this is the difference between looking only at the parent company and looking at consolidated statements that include subsidiaries.

• Central-government accounts: The central government’s general and special accounts—the starting point for examining its financial statements.
• Public sector: A broader scope that includes local governments, social security funds, the Bank of Japan, and public enterprises as well as the central government.
• Japan as a whole: The public sector plus households, private businesses, and private nonprofit organizations. This describes the economy of an entire country, not a list of government-owned property.

This article also sets out the intermediate scopes. Where a broader scope changes the date, which assets and liabilities are recorded, or how they are valued, I say so. A change in the net balance is not necessarily all due to “finding new assets.”

Putting the statements for each scope side by side

First, the overall picture. Figures are in trillions of yen. “Estimate” denotes a figure in which I have eliminated balances under stated assumptions; it is distinct from an official consolidated statement. I explain the calculations below.

How much to include	assets	liabilities	Net assets	Personality of numbers
National General and Special Accounts	783.4	1,483.3	-699.9	published financial results
Government + Bank of Japan	921.3	1,615.3	-694.0	Pro forma calculation offsetting major items
Country + Affiliation 199 corporations	1,044.9	1,574.7	-529.7	national consolidated financial statements
Country + 199 affiliated corporations + Bank of Japan	1,128.9	1,652.7	−523.8	Preliminary calculation with major items offset and eliminated
the entire public sector, including local governments	2,741.3	2,147.9	593.3	Trial balance offsetting confirmed amounts based on SNA
the entire Japanese economy, including households and private corporations	5,673.6	1,124.2	4,549.5	Display with domestic transactions eliminated based on the SNA

The first four rows are based on financial statements at the end of fiscal 2024; the last two use statistics for the end of December 2024. They do not add organizations row by row under a single set of accounting rules. In particular, moving from “central government + 199 related entities + Bank of Japan” to the “entire public sector” changes the classification of organizations, the items counted as assets and liabilities, their valuation, and the date. The table sets out figures for different scopes; it does not attribute the difference between a ¥523.8 trillion shortfall and a ¥593.3 trillion surplus to individual causes such as adding local governments or revaluing assets.

The final row for Japan as a whole does not carry forward the public-sector estimate’s unreconciled amounts. Instead, I separately eliminate domestic balances using domestic totals and external balances from the same SNA. Rounding may cause a subtraction to differ by ¥0.1 trillion.

The first lesson of the table is that no single figure for “government net assets” can stand for everything from central-government accounts to Japan as a whole. Each row covers a different scope.

Borrowing 100 does not raise a company’s profit

Consider a simplified illustration. All amounts are hypothetical, in units of ¥10,000, and I leave aside other assets and transactions. Suppose a company borrows 100 from a bank. It records “Debit: Cash 100 / Credit: Borrowings 100.” Cash and borrowings rise by the same amount; borrowing does not create profit of 100.

If it then pays 60 in current-period personnel costs, the entry is “Debit: Personnel Expenses 60 / Credit: Cash 60.” Cash falls to 40, while the borrowing of 100 remains. With no revenue, the current-period loss is 60 and net assets—assets minus liabilities—are −60.

As of the provisional example	assets	liabilities	net assets
Right after borrowing 100	Cash 100	Borrowings 100	0
After paying 60 in labor costs	Cash 40	Borrowings 100	-60

By contrast, if the company buys a machine for 60, it has 40 in cash and a machine worth 60. Total assets at the time of purchase remain 100. Depreciation expense is recorded over the period the machine is used. Two payments of 60 can have different accounting effects: one is an expense, while the other changes the form of an asset. The amount borrowed alone does not tell us how the money was used or how large a loss was incurred.

The national balance sheet also shows more liabilities than assets

Now apply this approach to the national government. The Ministry of Finance’s fiscal 2024 Financial Statements of the National Government, the latest release as of September 2026, report year-end assets of ¥783.4 trillion and liabilities of ¥1,483.3 trillion. The resulting balance of assets minus liabilities was −¥699.9 trillion.

National Balance Sheet for the End of Fiscal Year 2024	Amount
assets	783.4 trillion yen
liabilities	1,483.3 trillion yen
Net assets	-699.9 trillion yen

These figures combine the central government’s general and special accounts and eliminate internal loans and other balances. They are not statements consolidating local governments and the Bank of Japan. Because the line corresponding to a company’s net assets is substantially negative, the balance sheet resembles that of a company whose liabilities exceed its assets. The Ministry of Finance likewise treats this balance as corresponding to net assets in its comparison with corporate accounting.

That does not lead straight to “a company would go bankrupt, so the country will too.” For a company, liabilities exceeding assets on paper and being unable to make payments when due are different conditions. The government also has the power to collect taxes on future economic activity, which is not fully recorded in these assets. Conversely, not every future cost of public services and social security appears among its liabilities.

The table shows assets and liabilities recognized under its accounting standards. Adding only future tax receipts, or only future expenditure, would produce a one-sided calculation.

Nor can the ¥783.4 trillion in assets all be read as cash available for debt repayment. Roads and other tangible fixed assets are used to provide public services, while financial assets may be tied to lending or pension management. Just as a company cannot keep operating if it sells all its factories, the government faces constraints on disposing of its assets. “Net debt,” which deducts corresponding financial assets from a specified measure of debt, is also different from the balance of assets minus liabilities, which includes land and roads.

Distinguishing this year’s deficit from accumulated debt

The amount outstanding on a loan is a snapshot at a point in time: a stock. Revenue and expenses over a year record activity during that period: flows. The −¥699.9 trillion is a year-end balance, not a deficit incurred during that single year.

The same statements report fiscal 2024 expenses of ¥174.1 trillion and taxes and other funding sources of ¥158.2 trillion, leaving expenses ¥15.9 trillion higher. This is akin to a loss on a company’s income statement, but its scope and method differ from the cash balance in the national budget and the general-government deficit used for international comparisons. Borrowing is not profit, just as in the hypothetical example.

The balance of assets minus liabilities worsened by ¥4.2 trillion from the previous year, rather than by ¥15.9 trillion. The statement of changes in the financial statements also reflects exchange-rate and asset-valuation changes. A company’s current-year loss and its change in net assets do not always coincide either.

This distinction also matters for policy. If an asset is sold at its book value and the proceeds repay debt, assets and liabilities decline by the same amount and the net balance stays unchanged. Selling assets can improve cash flow or reduce interest costs, but it does not by itself end an annual excess of spending over revenue.

Government bonds and the primary balance

Government bonds are securities issued to borrow from investors. They are liabilities to the government and assets to their holders. The proceeds count as revenue in a government budget, but they are not like a company’s sales or profit. Repaying principal reduces outstanding debt; interest is the cost of borrowing. If a principal payment of 100 is financed with 100 in new borrowing, the stock of debt does not change.

This is where the primary balance (PB) comes in. Under the Ministry of Finance’s definition, it is tax and nontax revenue minus policy spending that excludes repayment of government-bond principal and interest. It indicates whether the year’s public services are covered by revenue other than borrowing in that year.

If tax and other revenue is 100 and policy spending is 98, the PB has a surplus of 2. But if interest costs are 5, the balance including interest is a deficit of 3. Leaving aside asset sales and similar measures, that 3 requires additional borrowing. A PB surplus does not necessarily mean that the stock of debt falls. Conversely, debt can rise in amount while its ratio to GDP falls if nominal GDP grows faster. The PB, the balance including interest, and debt as a share of GDP must be examined separately.

What remains when the government and Bank of Japan are consolidated?

Eliminating the main internal balances under the assumptions below yields assets of ¥921.3 trillion, liabilities of ¥1,615.3 trillion, and an asset shortfall of ¥694.0 trillion. This is my consolidated estimate using published figures, not an official consolidated financial statement issued by the government and the Bank of Japan.

The scope is the central government’s general and special accounts and the Bank of Japan. The starting points are the government’s fiscal 2024 financial statements and the Bank of Japan’s financial statements for the year ended March 2025. Figures are in trillions of yen and rounded to one decimal place.

Item	Simple sum of the government and the Bank of Japan	Consolidated trial balance after eliminating major intercompany accounts
assets	1,513.2	921.3
liabilities	2,207.1	1,615.3
Net assets	-694.0	-694.0

Which balances were eliminated?

The principle is the same as eliminating loans between companies in one group. For the following three items, I deducted the same amount from both assets and liabilities.

internal relations	the offset amount
Japanese government bonds held by the Bank of Japan and Japan's government bond debt	575.93 trillion yen
deposits made by the government with the Bank of Japan and the deposit balance of the Bank of Japan	3.94 trillion yen
loans from the national government to the Bank of Japan under repurchase agreements and the corresponding liabilities of the Bank of Japan	11.98 trillion yen

I also removed the government’s ¥14.355 billion equity contribution to the Bank of Japan from assets, reducing the net balance by the same amount. This is not an elimination of a liability. Rounding hides it in tables expressed in trillions of yen, but the net balance changes from −¥693.973 trillion before this elimination to −¥693.988 trillion afterward.

Calculation assumptions

For elimination, I matched the government’s bonds to the Bank of Japan’s carrying value of ¥575.93 trillion and provisionally assumed no valuation difference between the two sides. I also matched deposits to the Bank of Japan’s figures. For repurchase agreements, I used the Bank of Japan’s ¥11.98 trillion liability to the government and assumed a corresponding government asset of the same amount, eliminating the full balance. This assumption also eliminates the roughly ¥1.20 trillion difference from the ¥10.78 trillion that the government’s statement specifically identifies as due from the Bank of Japan. I did not add adjustments for different closing dates or unverified items such as taxes, interest, and payments to the Treasury. Therefore, this is the result of eliminating major items under stated assumptions, not a final amount reconciled item by item.

The point here is how elimination works. Removing government bonds and similar internal balances greatly reduces both assets and liabilities. But removing equal amounts from each side does not improve the net balance. That is why eliminating bonds held by the Bank of Japan does not eliminate the asset shortfall.

The Bank of Japan’s current-account deposits of ¥530.4 trillion and banknotes in circulation of ¥118.7 trillion do not disappear merely because government bonds are eliminated. Banknotes, unlike bonds, have no maturity or interest payments, so their full balance cannot simply be read as a future tax burden. Interest paid by the Bank of Japan on banks’ deposits, however, remains an expense. The Bank of Japan also explains the effect of interest on current accounts on its earnings.

How do the figures change when related entities are included?

Adding the Bank of Japan alone does not cover every public entity. The central government also has related entities such as universities, public financial institutions, and the Government Pension Investment Fund (GPIF), which invests pension reserves.

The Ministry of Finance’s official consolidated financial statements for fiscal 2024 add 199 related entities to the central government’s general and special accounts. They report assets of ¥1,044.9 trillion, liabilities of ¥1,574.7 trillion, and an asset shortfall of ¥529.7 trillion. They exclude the Bank of Japan and local governments. A Ministry of Finance guidebook cites, among other reasons for excluding the Bank of Japan, the government’s limited supervisory authority over it.

The official consolidated statements also follow specific preparation rules. GPIF holdings of ¥52.9 trillion in Japanese government bonds and ¥1.1 trillion in bonds issued by incorporated administrative agencies and similar entities, both at market value, are not eliminated even though they are internal holdings. Thus the official consolidation is not identical to the view sought here, which eliminates as many holdings among public entities as can be identified.

I therefore add the Bank of Japan to the official consolidation and eliminate the GPIF bond holdings mentioned above as well as the Bank of Japan-related balances. I also remove from assets and the net balance the Bank of Japan’s equity stakes in three entities covered by the consolidation, totaling ¥250 million. I assume the issuers’ liabilities corresponding to the bonds held by GPIF equal those bonds’ market value and eliminate them too. This produces an additional estimate eliminating major items under these assumptions.

Central government, affiliated organizations, and Bank of Japan	Sum before additional offset	After additional offset of main items
assets	1,774.7 trillion yen	1,128.9 trillion yen
liabilities	2,298.5 trillion yen	1,652.7 trillion yen
Net assets	-523.8 trillion yen	-523.8 trillion yen

Here too, removing matching claims and obligations does not alter the net balance. Eliminating equity investments does affect it, but the change disappears when rounded to trillions of yen. This is not an official consolidated statement reconciling every tax item, accrued interest, Treasury payment, and transaction between entities. Adjustments for differences in closing dates and carrying values also remain.

Expanding the scope to the whole public sector, including local governments

To examine public finances as a whole, we must include local governments, social security funds, and public enterprises alongside the central government and the Bank of Japan. I use the Cabinet Office’s “Stocks of Assets and Liabilities by Private and Public Sector”. Its public sector includes general government, public financial institutions including the Bank of Japan, and public nonfinancial corporations. Adding the Bank of Japan again would double count it.

The SNA is a statistical system for recording the whole economy, not the name of a fixed group of organizations. Here I take its “public sector” at the end of December 2024.

Classification of the public sector in the SNA	Includes
general government	central government, local government, and social security funds
public financial institution	public financial institutions such as the Bank of Japan
public non-financial corporation	public and non-financial business corporations and the like

This is not simply “central government + 199 related entities + Bank of Japan” with local governments and public enterprises added. The official consolidation and SNA classify organizations differently. Some of the 199 entities fall under general government in the SNA, while others are public enterprises. Adding the 199 entities and public enterprises separately would double count some of them.

Nor are all assets marked to market. Land is valued at market prices; buildings and equipment are valued using current replacement costs with allowance for wear. Deposits and loans follow other valuation rules. The Cabinet Office glossary explains recognition and valuation by type of asset and liability. The broad point is that the scope expands and the way assets are measured changes, but this calculation does not quantify the separate effect of each change.

The published public-sector total is ¥3,585.2 trillion in assets and ¥2,991.9 trillion in liabilities. Internal claims and obligations remain in these totals. I subtract ¥843.9 trillion in internal balances at the end of December 2024, as identified in the Bank of Japan’s Flow of Funds time-series tables, from both assets and liabilities.

the entire public sector	Published total before offset	trial balance offsetting confirmed internal balances
assets	3,585.2 trillion yen	2,741.3 trillion yen
liabilities	2,991.9 trillion yen	2,147.9 trillion yen
Net assets	593.3 trillion yen	593.3 trillion yen

Here is the breakdown of the eliminations. This estimate deducts the following amounts from both sides. Their total is ¥843.9 trillion before rounding; the displayed row values may not sum to that total because each is rounded.

Confirmed internal balance	Offset amount
government bonds and treasury discount bills held by the public sector	649.4 trillion yen
local government bonds held by the public sector	9.6 trillion yen
Government deposits at the Bank of Japan	6.3 trillion yen
deposits at the Bank of Japan by public financial institutions	0.8 trillion yen
Deposit into the Fiscal Loan Fund	23.1 trillion yen
Public financial institution lending: General government	79.3 trillion yen
Public Financial Institution Loans: To Public Non-Financial Corporations	22.8 trillion yen
Public Financial Institution Loans: For Public Financial Institutions	42.8 trillion yen
Public financial institution loans: For public exclusive financial institutions	8.8 trillion yen
intra-governmental lending	0.9 trillion yen

For national and local government bonds, I checked holdings of the central bank, general government, public nonfinancial corporations, public financial institutions, and public captive financial institutions. “Captive financial institutions” is a statistical category for institutions serving a particular corporate group or similar clients. For lending, I used balances that the Bank of Japan classifies as “lending by public financial institutions” where the borrower could also be identified as part of the public sector. That lending category includes loans made by Japan Post Bank and Japan Post Insurance.

This table is an estimate that expands the scope to the entire public sector and eliminates identifiable internal balances. I did not eliminate all government-related agency bonds because some issuers are classified as private. Equities and ownership interests with unverified counterparties, loans from general government to financial and nonfinancial sectors, repurchase agreements, and other balances also remain. Some public entities fall under other categories of financial institution, so the five sectors used here do not capture every holding of government bonds. Although the SNA and Flow of Funds figures refer to the same year-end, I used Flow of Funds data updated on June 25, 2026, so subsequent revisions could cause differences. Sector classifications and loan valuation methods also differ; I did not fully reconcile them. I assumed equal amounts could be removed from both sides for the specified balances and made no other adjustments. This is not a final consolidated figure based on a reconciliation of every internal transaction.

Did a ¥694 trillion shortfall become a ¥593 trillion surplus?

Elimination alone did not turn an asset shortfall into a surplus. The roughly ¥694 trillion shortfall is based on the central government’s and Bank of Japan’s books. The ¥593.3 trillion surplus is an SNA balance that also includes local governments and public enterprises. The organizations, dates, recognized items, and valuation methods differ. The SNA also records corporate shares and equity interests as liabilities of their issuers, and valuation rules vary by item. I have not reconciled how many trillions of yen each difference accounts for.

The ¥593.3 trillion balance can be understood as follows.

How to read the difference in the public sector	Amount
The difference obtained by subtracting liabilities from financial assets	-607.1 trillion yen
Non-financial assets such as land, buildings, and equipment	1,200.4 trillion yen
Assets minus liabilities	593.3 trillion yen

Financial assets alone are ¥607.1 trillion less than liabilities; adding land, facilities, and other assets produces a positive balance. This does not mean there is ¥593.3 trillion in freely usable cash. Nor is it a surplus after all future public pension benefits and other obligations have been deducted. Selling public facilities would affect services, and financial assets can be earmarked for purposes such as pension management. Beyond the sign of the balance, we need to examine what assets are actually held.

A balance sheet for “Japan as a whole,” including households and businesses

We can also include households and private businesses. This is not a consolidated government statement; it is a national balance sheet covering every domestic sector. It does not mean the government owns households or businesses.

Using the Cabinet Office’s end-2024 national accounts balance sheet and external assets and liabilities table, I eliminate ¥8,445.8 trillion in financial assets and liabilities between domestic sectors from both sides. The result appears below, in trillions of yen.

Item	Consolidate all domestic departments	The entire of Japan with internal transactions offset
assets	14,119.4	5,673.6
liabilities	9,569.9	1,124.2
Net worth (national wealth)	4,549.5	4,549.5

The remaining assets are ¥4,011.0 trillion in nonfinancial assets such as land, buildings, and equipment, plus ¥1,662.6 trillion in external assets. The remaining liabilities are external liabilities. External assets include monetary gold, which has no matching liability elsewhere. External liabilities include domestic corporate shares held by nonresidents, so they are not all debts with repayment dates. Rounding can produce a ¥0.1 trillion difference in subtraction.

For example, a household’s bank deposit is an asset to the household and a liability to the bank. They cancel when Japan is viewed as a whole. A bond held by a bank similarly cancels against the government’s liability. But this presentation does not remove a depositor’s legal right to withdraw funds or the government’s legal obligation to repay bonds. It simply eliminates internal balances in an aggregate view of Japan.

Assets held throughout Japan are different from money the government may use freely. Homes owned by households and equipment owned by businesses belong to their respective owners. Treating the country’s total wealth as a government repayment fund ignores who owns it.

Comparing central banks’ government-bond holdings

Are the Bank of Japan’s holdings large by international standards? I use the IMF’s government debt holdings by creditor for comparison. These are provisional end-2025 figures from the May 1, 2026 release. To put countries on a comparable basis, the debt measure covers general government, including local governments, rather than only central-government bonds.

end of 2025	share of general government debt held by the national central bank
Japan	41.9%
United Kingdom	17.8%
United States	11.7%

The denominator is total government debt after eliminating borrowing within government. It includes loans as well as securities such as central- and local-government bonds. The estimates use face value or adjust for price-valuation changes. It is therefore different from the share of Japanese government bonds held by the Bank of Japan. On a common measure, however, Japan’s share is high. Because the ECB covers multiple countries, it is not shown in the same way as these three countries.

The difference offers clues to the central bank’s interest-rate risk and how much the market might have to absorb if it reduces its holdings. Assessing safety also requires examining the corresponding liabilities and interest rates.

Is the U.S. central bank privately owned?

The Bank of Japan also has private capital contributions. What trades on the Tokyo Stock Exchange, however, is not ordinary corporate stock but Bank of Japan subscription certificates. The government provides 55% of the capital and private investors 45%, but contributors have no voting rights, and there is no equivalent of a shareholders’ meeting. Being able to buy a certificate in the market is different from being able to control monetary policy.

The U.S. Federal Reserve combines a public institution with private organizational features. The Board of Governors is a federal agency, while the 12 regional Federal Reserve Banks are separate legal entities under federal law. Member private banks hold shares in their regional Reserve Banks, but unlike ordinary corporate shares, they cannot be sold or pledged as collateral. The Reserve Banks do not operate for profit; earnings remaining after necessary expenses and statutory dividends are paid to the U.S. Treasury. It is inaccurate to describe the entire system as a private company.

How funds connect households, businesses, and government in Japan and the U.S.

Where money is held and how it flows: Japan and the U.S. Main channels · Household financial asset shares, March 2026 Japan Deposits play a larger role Household: Holding and managing funds Cash and deposits 47.2% Stocks and other securities16.7% + Mutual Fund6.9% Bank Deposits and Payments / Lending Securities market and institutional investors Stocks and Bonds / Investment Trusts, Insurance, and Pensions Loans Equities and corporate bonds Government bonds Businesses Equipment, R&D, expansion Government Public services and investment Banks also hold bonds; households also invest directly Central bank Bank of Japan Trades bonds with banks and markets Works through reserves and interest rates Overseas investors Investment in bonds and equities Domestic funds also invest overseas United States Equities and funds play a larger role Household: Holding and managing funds Cash and deposits 10.7% Stocks and other securities43.4% + Mutual Fund13.3% Bank Deposits and Payments / Lending Securities market and institutional investors Stocks and Bonds / Investment Trusts, Insurance, and Pensions Loans Equities and corporate bonds Government bonds Businesses Equipment, R&D, expansion Government Public services and investment Banks also hold bonds; households also invest directly Central bank Federal Reserve (Fed) Trades bonds with banks and markets Works through reserves and interest rates Overseas investors Investment in bonds and equities Domestic funds also invest overseas Structural difference: the relative weight of bank credit risk and investor market risk. Arrows show main connections, not amounts, causation, or lending sequence. Reverse flows such as interest, dividends, and repayments are omitted. Banks do not simply re-lend deposits. Lending creates deposits, subject to capital, liquidity, and other constraints. Source: Bank of Japan, “Flow of Funds: Japan, U.S. and Euro Area,” August 31, 2026, Figure 2. Shares of outstanding assets, not new investment that year. Households include nonprofits in the U.S. but not Japan. Percentages refer to asset holdings.

According to the Bank of Japan’s comparison of flow-of-funds accounts for Japan, the United States, and Europe, cash and deposits accounted for 47.2% of Japanese household financial assets and 10.7% of U.S. household financial assets at the end of March 2026. Equities and similar holdings accounted for 16.7% in Japan and 43.4% in the United States, showing a substantial difference in how assets are held. The U.S. household sector includes nonprofit organizations; Japan’s does not. The arrows in the diagram show major transaction relationships, not amounts of funds.

In both countries, government debt corresponds to assets held by banks and investors. But the statement that “government bonds are private-sector assets” describes an accounting relationship; it does not prove that higher spending necessarily makes society as a whole wealthier. Household financial assets also belong to households and are not automatically available to repay government debt.

How do other countries compare when central banks are included?

For an international comparison that includes central banks, I use the public-sector balance sheets in the IMF’s Fiscal Monitor (2018). The estimates below are for 2016, not a current ranking. This broad consolidation includes local governments and public corporations as well as central governments and central banks. Its timing, coverage, and valuation methods differ both from the roughly ¥694 trillion figure based on the central government’s and Bank of Japan’s books and from the Cabinet Office’s SNA figures discussed earlier. I compare countries within this study’s framework; I do not link Japan’s figures to the earlier table to measure improvement or deterioration.

Figures are expressed as percentages of each country’s GDP. “Assets minus liabilities” subtracts all liabilities from all assets. “Net financial assets” subtracts liabilities from financial assets only, excluding nonfinancial assets such as land and roads.

Country	assets	liabilities	Net assets	Net financial assets
Japan	311.0%	316.8%	-5.8%	-170.2%
United States	175.0%	191.7%	-16.7%	-100.8%
United Kingdom	135.0%	260.3%	-125.3%	-195.3%
Germany	209.0%	228.6%	-19.6%	-83.6%
France	187.0%	229.0%	-42.0%	-147.6%
Canada	176.6%	140.4%	36.1%	-58.8%

Japan’s balance, including roads and other assets, is −5.8% of GDP. On a financial-assets-only basis, however, it is −170.2%, the second-largest shortfall among these six countries after the United Kingdom. Japan has many assets, but not all of them can be used to repay debt. This comparison shows both sides. Roads provide public services but cannot readily be sold. Some financial assets also have restrictions on their use. An asset shortfall alone does not establish that Japan faces the greatest risk, but the large stock of assets alone does not establish safety either.

Source: IMF published data, Figure 1.1. These are estimates available when the report was published in 2018; country differences in coverage and valuation remain. Liabilities include obligations such as public employees’ pensions, so they differ from standard measures of government debt. Figures are rounded to one decimal place.

How does the IMF assess Japan’s public finances?

So far, I have examined government assets and liabilities across several scopes. But a positive balance on a financial statement does not guarantee that enough cash is available to repay debt. Nor does a negative balance, by itself, determine when payments will become impossible. For a company, we examine future income and expenditure and cash flow alongside the balance sheet.

The fiscal-risk assessment in the IMF’s 2026 report on Japan likewise considers future ability to pay. It covers “general government”—central and local governments and social security funds—and does not include the central bank or public corporations. It is not a direct score for the balance sheet of the entire public sector discussed here.

The following compares what the IMF examines with questions asked of a company’s finances.

What the IMF examines	Corporate-finance analogy
Debt stock and size of the economy	Is debt too heavy for the income-generating base?
Outlook for tax revenue, spending, and interest costs	What will future income and expenditure look like?
Maturing debt and new deficits	How much financing, including refinancing, is needed each year?
Buyers, currency, and maturity of government bonds	From whom, and on what terms, can debt be refinanced?
Resilience to slower growth or higher interest rates	Can cash flow continue if projections prove wrong?
Financial assets and restrictions on their use	How many assets will be available when needed?

The IMF assesses Japan’s overall risk of fiscal stress as “moderate.” Its judgment is that risk is mitigated by a large domestic investor base for government bonds, yen-denominated borrowing, and long debt maturities that spread out the impact of rising interest rates. It also considers government financial assets but notes that many are restricted in how they can be used.

The IMF is not saying that Japan is safe because consolidating the whole country would show assets exceeding liabilities. It projects future debt and financing under assumptions about growth and interest rates and considers spending increases due to aging and higher interest costs. There is no guarantee that domestic buyers will continue purchasing bonds on the same terms, and the report calls for fiscal improvement over the medium term.

From publishing data to disclosing a readable overall picture

Publishing documents is different from enabling the public to understand the overall state of government finances. Even in assembling the figures in this article, expanding the scope changed the date, what was recorded as assets and liabilities, and how those items were valued. A roughly ¥694 trillion asset shortfall and a ¥593.3 trillion public-sector asset surplus can look contradictory if those differences are left unexplained.

Information for breaking down the reasons for these differences is also limited. The Cabinet Office’s sectoral balance-sheet table for general government gives only the combined total of central government, local government, and social security funds for fixed assets and inventories. Because that table does not isolate all local-government fixed assets, I could not fully separate the effect of adding local governments from differences in valuation and other factors. This is a specific limit encountered in this comparison, not a claim that the underlying information does not exist.

Even when documents are public, fiscal transparency is inadequate unless readers can trace and verify why the numbers differ. The published materials examined here did not allow me to break down the difference completely by cause. I believe that this limitation itself needs to be addressed to make the full picture of government finances intelligible.

To help the public judge burdens and spending, I propose an annual publication linking the following information:

• A balance sheet that makes its scope clear. Show assets and liabilities for central and local governments, social security funds, the Bank of Japan, and public corporations at a common date and under common standards, with internal balances traceable before and after elimination.
• A reconciliation table explaining differences between figures. Separate differences between national financial statements and statistics into differences in scope, valuation, and other adjustments. For assets, state their intended uses and restrictions on sale or use.
• Projections tied to future ability to pay. Show tax revenue, spending, interest costs, maturing debt, and financing needs, and allow comparison under different growth and interest-rate assumptions.

The IMF’s assessment is one input for judging future ability to pay. By itself, however, it does not provide a full account of what the public sector owns and what obligations it carries. Connecting the balance sheet with cash-flow projections would let us move beyond arguments based on a single figure—whether that figure is “there are assets, so everything is fine” or “there is a lot of debt, so danger is certain.”

We must then test whether spending produces results commensurate with its costs and consider a sustainable combination of burdens and expenditure. Making the country’s vast figures readable and usable for public judgment is the foundation for doing so.

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