The severity of the government debt problem may be overstated in some respects - 95 percent of the outstanding debt is domestically held, for example, and 59 percent is held by public institutions, so that the Japanese people truly "owe the debt to themselves" - but that the government's annual deficit is now about 8 percent of GDP is nevertheless a serious concern.
Moreover, an aging Japanese population will add to the government's budgetary burden in coming decades. In addition to making policymakers more reluctant to use expansionary fiscal policies in the first place, Japan's large national debt may dilute the effect of fiscal policies in those instances when they are used.