If Rachel Reeves was thinking she could do a Japan and greatly increase state debt without incurring an increase in interest charges, she needs to think again. The new Japanese PM has soon encountered bond market resistance to the idea that she can spend and borrow more given the elevated state of Japan government indebtedness. The Japanese PM who likes to draw a parallel between herself and Margaret Thatcher clearly did not get the memo that said that Margaret was keen to control spending and sell state assets to reduce risks and raise money.
The Japanese bond market has been spooked by the new Prime Minister wishing to put through further fiscal stimulus measures. Japan’s state debt is a massive 1324 trillion yen ( £6,400 bn) , more than double the UK’s. For years this has been affordable as for much of that time Japan has been able to borrow at rates below 1%. Now alarmed by both the enormous stock of debt and by future high borrowing requirements, the markets have put the cost of 10 year borrowing for the state up to almost 2%. As the old debt matures the government has to repay it and replace it with new borrowing. This is now going to be at much higher interest cost, placing more strains on the Japanese budget and taxpayers.
Current debt interest costs are around 10 tn yen a year (£48bn), a manageable cost. Were the whole 1324 tn yen to be refinanced at 2% in due course that would be an interest cost of 26 tn yen (£125bn), more than two and half times the current level. If this takes place at the same time as the government seeks to borrow a larger share of its current budget each year the compound effects become more serious. The Japanese bond market will experience big demands and further strains. The pressure is on the Prime Minister to reduce her additional demands to spend more and to cancel tax cuts to avoid making a difficult situation worse.
The absolute level of debt interest is still modest compared with say the UK. With the Uk now facing much higher interest rates, in excess of 4%, the debt service costs in the UK have already exceeded £105 bn and are on course for £131 bn by the end of the decade according to the official forecasts. The UK over the next five years on current government plans needs to raise £628bn for additional spending and £675 bn to replace retiring debt. Both these fund raisings will add to the interest burden. That is why UK 10 year rates are at 4.4%.
I have highlighted the refinancing. Whilst this does not add to the already high stock of state debt, it does allow the markets to charge the government more for debt it already holds as the price of new borrowing to repay the old debt. Rachel Reeves is like someone with a large mortgage that they want to refinance and at the same time want to take out a big car loan for a new car. The bank manager considers whether you can afford both, and if willing to allow it charges more for both to reflect the greater risks from such high borrowings. The bank may say defer the car or buy a cheaper one.
The bond vigilantes moving in on Japan are not helpful to Rachel Reeves position. Some will see that with considerably less debt than Japan the UK pays considerably more interest already, and may be forced to pay yet more as the Japanese free ride in world debt markets comes to an expensive end.
December 6, 2025
Good morning.
It is far worse for the UK than it is for Japan for, Japan has some of the largest Sovereign Wealth Funds in the world. So I am surprised that :
a) the Japanese government has to borrow from the Bond Markets, and
b) the Bond Markets have reacted in the way they have.
What concerns me most both about our economy is, the ability to pay our bills and the endless ability of politicians to inflict harm upon harm on the nation. It is as if they want it to fail which, I believe they all do.
On a slightly different topic I saw in the budget the proposal for road pricing. I have said on this site for something that, it was ,my belief that the government intend on selling off our road infrastructure. To do this they must first monetise it. Once then it is both shown to work and wealth can be extracted from it, it will be sold off.
Mark my words.
Reply Unlikely the government will sell the roads. So far the plan is a kind of road pricing for electric cars as a surrogate tax. It is more likely they would put this tax up on electric cars after introduction at a modest level and even add a charge to overtaxed petrol car users.
December 6, 2025
Japans problems are relatively minor compared to ours. I bet Thieves would give her right arm to be able to borrow at 2%.
Despite having few raw materials they run a healthy trade surplus and domestic savings are some of the highest in the world.
They also have a government who rule for the people, no mass immigration of aliens and no undermining of Japanese culture.
In many ways she is like Maggie.
December 6, 2025
Yes, it’s not so much how much is borrowed, that can be inflated away, its how much it COSTS to borrow. By way of comparison, the French national debt and also the Italian debt, whilst both are greater than ours as a % of GDP, cost less in interest payments than ours. It may be because it’s felt there’s a German back-stop for it.
Reeves/2TK are, by front loading the borrowing and hoping to service it from ‘expected future growth’, seems to be naive and setting us up for a debt disaster. The fact that the OBR thinks they can accurately forecast adequate tax revenue in 4-5 years time shows that they are not fit for purpose.
December 6, 2025
There were a couple of Frenchmen on Radio 4 yesterday discussing French indebtedness.
One argued that France’s debt was not so serious as Britain’s because they were part of the Eurozone! With Germany’s current weakness that is a rather empty boast.
The other was apparently named in honour of Harold Wilson (which would endear him to the channel).
December 6, 2025
To reply:- hugely over taxes petrol cars more like 8p per mile in fuel duty, road tax and VAT.
Plus EV save no CO2 anyway and eat more tyres, and cause more road wear as heavier plus batteries short lived and hard to recycle.
December 6, 2025
“refinancing debt can get tricky if you spend too much”
Indeed even worse as in the UK they spend so much of it doing net harms like Covid Lockdowns, coercing net harm Covid Vaccines into people (even people with zero need of them even had they been safe and effective), net zero energy lunacy, mass low skilled net cost immigration levels, Anarcho-tyranny, encouraging fecklessness with benefits higher than wages…
December 6, 2025
See M6 Toll. Macquarie would doubtless salivate at an opportunity to repeat dividend extraction while leaving other banks with non performing debt. They also are involved in the scheme to accelerate the depreciation of the gas grid on the grounds we won’t be using gas by 2050 under Net Zero.
They will be delighted by the new OFGEM plan for £17.8bn of investment in the gas grid.
December 6, 2025
Those who recklessly borrow to pay debts end up chasing their own tails faster and faster, failing to catch up before collapsing.
December 6, 2025
Indeed especially in the UK with banks so often having such rip off margins!
December 6, 2025
Having indulged in reckless lending leading to heavy losses in the Financial Crisis they needed to replenish their equity capital. Bailey now thinks they are strong enough to survive without as large a chunk of QE originated reserves, and that they should be encouraged to gear up their lending again.
In the present economic environment that seems foolish, risking a fresh crisis. It seems to be an attempt to privatise government borrowing, with the extra lending siphoned off in taxes. It was the essence of the Brown scheme that led to the Financial Crisis.
December 6, 2025
Almost anything this government, the BoE or Bailey does is invariably wrong headed!
December 6, 2025
Bloke
Correct, at some stage you simply have to live within your means or go bankrupt, the longer you leave it to resolve the problems, the more expensive and higher the debt.
Governments have got away with it so far by inventing/printing more and more money, which eventually devalues what you already have, it just delays the inevitable it is not a solution in itself.
December 6, 2025
Though going bankrupt or other insolvency can often be the best option for people – depending on your position!
December 6, 2025
This lack of sense about borrowing may be a personal trait. I was amazed to find that my first and ex wife, who was from a poor background financially, was buying new clothes from a catalogue which charged high interest rates. Fortunately in those days it was legal to cancel our joint bank account. Other friends I have found have borrowed massive amounts on credit card and are wasting what earnings they have on ridiculous interest payments. Rachel from accounts [ if only she was and could add up] obviously doesn’t understand and neither did the Socialist publisher that was on GB News this week when you tried to explain how her figures were wrong. His face was a joy to see as he realised that he was out for a duck. When the sharks circle and see the UK ditching industry for a CO2 scam and rewards for daytime TV watchers exceeding workers wages, the interest payments could go up like credit cards and catalogues and we will be on debtors restraint orders.
December 6, 2025
The sooner we have a Bond Market strike the better. It will finish this incompetent shower for a generation.
Mind you the arch commie may use it to call a national emergency and cancel futhrr elections which would suit him fine. I forsee another Mussolini moment.
December 6, 2025
I would not put this beyond the appalling two Tier Kier. He has, thanks to the Con-socialists and Sunak, a huge majority and is clearly very happy lying and Gerrymandering hand over fist. Happy with political prisoners and suppressing free speech too it seems.
December 6, 2025
Nicely put. Unfortunately I missed the GB News programme you’ve referred to as I’ve been away. I’ll see it if I can find it on catch up. I enjoy the spectacle of Socialists being forced to confront the consequences of their delusions.
December 6, 2025
I am amazed that those with high credit card debt don’t just declare bankruptcy.
Once you have that level of debt of that high interest it is impossible to get out of it without zero interest transfers.
Our government similarly will never be able to reduce the amount of debt it has while paying £100 billion plus a year in interest.
Japan’s 2% rates are, two quote a Yorkshire man, “luxury”
December 6, 2025
Indeed. Lots of solutions for unsecured debts even short of bankruptcy take good advice, they will often write if off they have to comply with certain rules.
December 6, 2025
Labour are finally making efforts to explain debts to voters, using piles of biscuits. Well done and it’s edible afterwards.
https://www.theguardian.com/politics/2025/dec/05/labour-mp-gordon-mckee-video-explaining-uk-debt-biscuits-33m-views
December 6, 2025
I think that UK style socialism realises that it is past its sell by date and is contriving a series of IEDs to bequeath to the incoming Reform government to slow the pace of necessary radical change. These IEDs will comprise not only the debt from gross overspending, but pustules such as the new chinese embassy, the re-entanglement with the EU and an overly dependant none productive segment of the working population. The actions they are taking are so patently dumb, they cannot be anything but deliberate.
December 6, 2025
Agricola:
Add to your list the sabotaging of our electricity supply with the Clean Power 2030 project estmated by NESO to cost “over £40bn/year”.
December 6, 2025
Yes. Scorched Earth policy.
December 6, 2025
As long as Starmer and Reeves keep their jobs it doesn’t matter what happens to the UK economy. They must keep their left wing on side whatever happens.
December 6, 2025
The dreadful Nigel Farage has, yet again, denounced the BBC and insulted one of it’s junior lady presenters over his alleged racism whilst a schoolboy.
This is the sort of thing that Trump does when called to account by American media. When faced with BBC and other media reporting allegations of racism – on the record – by no less than 24 of his Dulwich school colleagues, his immediate response was to threaten to sue whilst issuing angry denials.
Legal threats and bluster failed to stop the allegations. Farage then attacked and tried to smear the individuals involved – while continuing to deny the reality. This also failed, so Farage accelerated his attack on the media, threatening to “boycott” the BBC (hooray, no more Farage on Question Time!!)
The current, shameful attempts by those on the far right of the Conservative party to suck up to Reform, by apeing many of their policies in attempts to organise a Reform/Conservative pact, are doomed to failure.
All that will happen is that more turncoat Tories who lost their seats at the last election – some of whom actually attended the recent, failed, Reform party conference – will jump ship and kowtow to Farage and Tice.
December 6, 2025
SG
Times and attitudes were very different 50-60 years ago, that does not make it right or wrong then, but it also does not make it right or wrong now.
Then you could legally drive a car without seat belts, you could drink and drive without being classed as drunk (unless you really were) now it is illegal to do both.
School kids said silly things then, as they do now, you hopefully learn to be more respectful the older you get, it should come with maturity and life experience..
December 6, 2025
These Uniparty deluded ex Dulwich College pupils with long memories seem to be nice but dims. It doesn’t do the school much to enhance its reputation. Did you go there or to similar College? My old public school has gone to pot too, with a very woke headmistress changing house names from patriotic seamen to green trendies.
December 6, 2025
Farage was quite right to do this. Whether he said this as a child or not (and he has denied it) is irrelevant and clearly just being dug up by people as they fear reform! Even I said the odd daft thing as a child or told the odd dodgy joke – though I was rather more of a defender of anyone being picked on for being fat, dim, uncoordinated, useless at sport or for race reasons as were most kids at my northern state grammar!
Question time as either 6 to 0 or 5 to 1 left wing slanted. One sensible person at best endlessly interrupted by the other 4 plus the daft irritating chairwoman who seems to think she is a Net Zero expert with her languages degree and BBC wrong think on every topic!
December 6, 2025
But you do castigate the social value of anyone who qualified for less than a doctorate usually earned in some bizarre useless niche subject no-one has heard of or cares about.
December 7, 2025
Not at all, many people are often educated into group think stupidity in many subjects!Many with many degrees can be very stupid and visa-versa.
December 6, 2025
The former Dulwich schoolboys haven’t produced a shred of EVIDENCE to support their 50 year old “memories.”
Remember that quaint old legal custom (which lefties are so inclined to forget about when it suits them) “Innocent Until Proven Guilty.”
December 6, 2025
All my life, until I left the country I was born in, I was called ‘English’ as a derogatory term. So was Musk.
If you live in someone else’s country you have to expect your differences to differentiate you from the majority.
I never complained. I just came home.
December 6, 2025
This in Scotland or similar was it? In Australia it would have been the dire evil racist P word – You Bl***y Pom!
December 6, 2025
South Africa.
December 6, 2025
PS, the Ozzies are British, calling someone a Pom is like a Scouse calling someone from Birmingham a Brummy – same race, same nation.
To be safe you should always live amongst your own people, especially in times of trouble.
December 6, 2025
No one as an adult should be held to account for what they did or said as a teenager; it’s a time when people learn.
I recall I was a jerk, though I’m grateful to my sister who gives more charitable recollections.
December 6, 2025
‘Young and clottish’, maybe JR never went through that stage.
December 6, 2025
On the plus side for Japan, their Politicians have not destroyed their industrial base on the insanity of Net Zero. And they haven’t destroyed their national cohesion and future prosperity with decades of mass 3rd world immigration.
Oh, and they are not semi-attached to the EU, acting as a ball and chain on their economy (and Sovereignty).
So all in all, their situation is vastly better than ours.
December 6, 2025
+1
December 6, 2025
Japan has an extremely low fertility rate – 1.15. They are storing up for themselves major problems. Their high debt will have to be supported by a dwindling workforce. It isn’t a magnet for migration as hardly anyone outside the country can speak Japanese, and without it you’re lost.
December 7, 2025
So they are automating; using technology. Which is exactly what we should have been/should be doing, but the lunatic Establishment instead imports millions of uneducated or semi-educated, low-wage and unemployable 3rd worlders.
December 6, 2025
Well said.
December 6, 2025
Perhaps it is worth reflecting on what debt is?
Debt is expenditure in advance of income. It is usually justified by an urgent need today for something beyond ones capacity to pay for it from savings. House purchase is a classic example. We need somewhere to live and will be there for many years, so paying for it bit by bit, from future income is considered a reasonable risk by the lender.
The whole system hinges on stability. It also hinges on agreed value of the currency being used to pay back the loan…..
This is where the global risk sits. As the stability of a nation comes under threat by adverse economic policies the value of its currency declines. The cost of loans move up to reflect that uncertainty.
That sequence of events is what Rachel Reeves is wrestling with (we hope). She may not fully appreciate her predicament and so ignores the fundamental rules of the international currency markets. Sadly, the UK is in a fragile economic state with industry closing down and only services including banking providing any confidence to our international lenders that we are good for the money.
Our capacity to fund our borrowings is carried entirely on the shoulders of the tax payers.
That group of borrowing underwriters are in decline, with many physically leaving Rachel’s grasp for money and many others opting to join the growing ranks of the benefit claiming class. Those changes are adding to the state borrowing burden not reducing it.
The perfect storm awaits. The only unknown is when it will hit?
December 6, 2025
Sir John
It mustn’t be forgotten Japan and its people are permitted to ‘produce’. They are allowed to have an industrial base for their home market and for exports, meaning that earnings and wealth are created for the nation. Japan is also a democratic self-governing county.
The UK accelerated by May, Johnson, Sunak and now Starmer has been stripped of its capacity to earn its future lies on imports and rule taking from a foreign power with an unaccountable bureaucracy of technocrats. The UK is on the opposite track under 2TK to Japan, ever growing high tax, high borrowings, removal of democratic elections, removal of fair trials. A culture of a benefit society, where the ever deceasing taxpayer pool is funding and every increase number that have found it pays more not to work.
Japan isn’t even governed by politicised judges in the ECHR and elsewhere, or an over burdening imposition of a criminal invasion
December 6, 2025
‘at the same time want to take out a big car loan for a new car.’ ah, but, can’t she claim mental anxiety and have the taxpayer hand her a fully funded car?
Then again isn’t that what you are saying, the taxpayer is funding her fantasy world
December 6, 2025
You have to ask the question; just why did countries get so greedy with wanting more without being able to pay directly for it? What happened to their sense of fiscal responsibility?
The concept of buy now pay later has never been a good one, but it seems to have become the modus operandi, not just for governments unable to juggle national finances but too many individuals who find credit an easy option.
Perhaps there was more behind this rush to indebtedness, as too many countries have been following globalist style references – You don’t imagine it was anything to do with us all following a route to bring western nations to their knees, surely not?
December 6, 2025
British people in Britain have the poorest standard of living of all the British people on earth. They live in hovels! Mothers can’t even raise their own babies, they have to Labour for pennies.
Money is NOT spent in Britain unless on foreigners.
If Britain could repatriate all the money sent abroad in ‘remittances’, aid, charity and funding for global institutions, we would be able to give [ the EM world ed ]£18 trillion ….and have enough over to restore Britain.
December 6, 2025
David Ricardo – the 18th/19th century economist – saw these issues years ago. To quote from the Wikipedia article on him:
Ricardo wanted to establish a firm ground between the bank [of England] and the control over monetary policy because there was power within the banking system that Ricardo believed needed to be considered carefully. In 1816, Ricardo said “In the present state of the law, they have the power, without any control whatever, of increasing or reducing the circulation in any degree they may think proper: a power which should neither be entrusted to the State itself, nor to anybody in it; as there can be no security for the uniformity in the value of the currency, when its augmentation or diminution depends solely on the will of the issuers.”
So there could be neither trust with the old-fangled debased metal currency (eg silver) nor with the new-fangled ‘Paper’ money that could be printed. Little has changed.
December 6, 2025
Of course Japan is currently being cited by Zack Polanski and assorted MMT enthusiasts as evidence you can borrow and print money to pay for whatever you want with no negative consequences. One difference is only 12% of Japanese debt is held by foreign entities outside Japan. For UK the figure is 31%. Also 25% of UK debt is inflation-linked whereas only 1% of Japan’s debt is. This means UK is far more exposed to the bond markets and inflationary policy.
December 8, 2025
Indeed and far more confidence in lending to Japan than Starmers’ UK as show by the bank rates charged.
December 6, 2025
Raise the colours’ ‘operation Overlord’ has achieved what the Government couldn’t.
No small boats landing in the U.K. for the last 7 days.
These men are heroes!
George Crosses required shortly.