Japan’s ¥1,400tn ($9tn-$10tn) public debt dominates almost every fiscal debate. Far less attention is paid to the other side of the balance sheet.
Japan owns one of the largest portfolios of public commercial assets in the developed world – spanning land, buildings, infrastructure, financial institutions and operating companies – yet these assets barely feature in discussions about fiscal sustainability, stimulus or reform. The result is an oddly one-sided view of the state’s finances, in which obligations are scrutinised relentlessly while assets remain largely invisible.
This asymmetry matters. When governments focus exclusively on debt while treating assets as an afterthought, they tend to make the same mistakes repeatedly: underusing valuable property, mispricing risk and narrowing their policy options precisely when flexibility is most needed. Japan’s debate over how to fund tax cuts and fiscal stimulus has revived scrutiny of foreign exchange reserves. But the larger issue is the absence of a coherent view of the state’s full balance sheet.
Recognising the asset side of the balance sheet does not diminish the importance of fiscal discipline. It strengthens it by grounding policy in a complete view of the state’s financial position.
Undervaluation of assets distorting decision-making
According to Japan’s government accounts, public non-financial assets amount to roughly ¥800tn ($5tn), recorded largely at historic or replacement cost. Financial assets – including equity stakes in public financial institutions – add several hundred trillion yen more. These figures are not market valuations, nor do they reflect highest-and-best-use. But they are sufficient to establish an uncomfortable fact: Japan’s public assets are of a similar order of magnitude to its public debt, yet are governed, reported and debated as if they barely exist.
Public real estate is the least visible component of this portfolio. Central and local governments own vast tracts of urban land and buildings, much of it carried on balance sheets at book values that bear little relation to market reality. Assets acquired decades ago often appear at near-zero historical cost, even when located in some of the most valuable urban areas in the world. The accounting treatment may be conservative, but the policy consequences are not.
Undervaluation distorts decision-making. Assets that appear negligible on paper are treated as disposable. Assets that are poorly mapped are poorly managed. And asset sales conducted without a portfolio perspective tend to transfer long-term public wealth to the private sector at moments of fiscal stress. The issue is not whether governments should sell assets, but whether they understand what they own, how those assets perform and what role they play in the state’s overall financial position.
Focus on reserves is misguided
Japan’s renewed focus on its $1.4tn foreign exchange reserves illustrates the problem. Reserves are visible, liquid and politically legible. They sit neatly in a single account and generate measurable income, especially when interest differentials are favourable. By contrast, the rest of the state’s asset base is fragmented across ministries, agencies and levels of government, reported inconsistently and rarely assessed as a portfolio.
Treating reserves as a fiscal backstop while ignoring the broader asset base risks repeating a familiar pattern: monetising the most transparent assets while leaving the largest sources of value unmanaged. It also blurs the distinction between tools designed for currency stability and those intended for long-term wealth management.
Japan is not alone in this. Across advanced economies, governments have developed increasingly sophisticated frameworks for monitoring debt while leaving asset governance under-institutionalised. Debt management offices are professionalised and centralised; asset management is dispersed and often politicised. The result is a structural bias towards short-term fiscal fixes and asset disposals rather than long-term balance-sheet optimisation.
Discipline begins with visibility
None of this implies that Japan should emulate China’s state-led investment model, nor that it should rush to financial engineering. The lesson is more prosaic. Countries such as Singapore have shown that disciplined balance-sheet management begins with visibility: comprehensive asset mapping, clear performance benchmarks and institutional separation between policy objectives and commercial decision-making. Without that visibility, even highly transparent democracies can erode public wealth without fully realising it.
Japan’s fiscal debate is often framed as a choice between debt accumulation, tax increases or spending restraint. That framing is incomplete. The more consequential choice is whether the state continues to operate with a partial balance sheet – one that measures debt precisely while leaving assets opaque – or whether it develops the institutional capacity to see, govern and manage public wealth coherently.
Until that happens, Japan’s debt will continue to look overwhelming – and its options far more constrained than they actually are.
Dag Detter is Principal of Detter & Co.
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AloJapan.com