The government giveth, the BoJ giveth straight back

The Bank of Japan will soon become the largest holder of Japanese government bonds. Since the income it earns on those securities is mostly transferred back to the government, the Bank’s JGB purchases substantially reduce the public interest bill. In fact, while the level of government debt is set to rise further in coming years, the cost to the government of servicing that debt is likely to fall relative to GDP due to higher transfer payments from the BoJ.