Japan’s Debt Puzzle: Sovereign Wealth Fund from Borrowed Money

2026

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AI-generated summary

1) This paper analyzes Japan's unique strategy of financing its sovereign wealth fund through borrowed money, highlighting the associated risks and implications for fiscal sustainability.
2) * Examines how Japan's public sector operates a de facto sovereign wealth fund by investing borrowed funds in risky assets.
* Details the duration and currency mismatches inherent in Japan's strategy and their potential consequences.
* Compares Japan's approach to the fiscal challenges faced by the United States, arguing why the US is unlikely to replicate it.
3) Japan, government debt, sovereign wealth fund, fiscal sustainability, risk management

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