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How can Japan service its public debt if its target inflation rate of 2% is reached?
I'm interested in learning about how Japan can service its public debt if it reaches its target inflation rate of 2%. Can you tell me more about that?
Certainly. When inflation rates increase, the nominal value of the debt remains the same, but in real terms, the debt becomes less expensive to service. This is because the debt is fixed in nominal terms, so a higher inflation rate effectively decreases the real value of that debt over time.