![[Seoul=NEWSIS] Reporter Kim Geum-bo = On the 20th, an employee was working at the Hana Bank Counterfeit Response Center in Jung-gu, Seoul. The yen exchange rate rose to the early 158-yen range for one dollar on the 20th as the U.S. Treasury Department announced it would increase its purchases of government bonds, causing long-term interest rates to fall and triggering yen buying and dollar selling amid concerns over a narrowing interest rate differential between the United States and Japan. In the Tokyo foreign exchange market, the yen exchange rate at 8:30 a.m. on that day stood at 158.21–158.23 yen per dollar, up 0.96 yen from the previous day's close at 5 p.m. 2026.08.20. kgb@newsis.com /Photo=Kim Geum-bo](https://thumb.mt.co.kr/cdn-cgi/image/f=avif/21/2026/08/2026082015204514198_1.jpg)
The U.S. federal government debt has surpassed 40 trillion won. With approximately two months remaining until the end of the U.S. fiscal year, accumulated interest costs alone have reached 1.17 trillion won. While the scale of debt is concerning, what is more worrying is that the burden of interest payments is rapidly eroding fiscal capacity that could otherwise be used for welfare, education, national defense, and future investments.
The combination of widening fiscal deficits, large-scale government bond issuance, and price instability has caused U.S. long-term Treasury yields to surge recently. The 30-year yield briefly climbed as high as 5.337%, marking the highest level in nearly 19 years since 2007. The U.S. Treasury Department doubled the scale of its buyback program for long-term Treasuries offered in the market. However, this is merely a measure to put out an immediate fire and does not resolve structural fiscal deficits or the burden of interest payments.
Japan is no different. Japan has managed to sustain government debt at the world's highest level based on low interest rates and high domestic savings. However, with rising prices and the Bank of Japan moving away from its monetary easing stance, the 10th-year government bond yield has recently approached 3%. The Japanese Ministry of Finance projects that if current economic and interest rate trends continue, the government will need to spend approximately 41 trillion yen in fiscal year 2029 to repay interest and principal on government bonds.
Korea is not yet at a stage of fiscal crisis. However, government debt is projected to reach 1,412.8 trillion won by the end of this year, accounting for 50.6% of gross domestic product (GDP). Last year, the population aged 65 and over reached 10.72 million, exceeding 20.7% of the total population as Korea entered a super-aged society. Although tax revenues temporarily increased due to a semiconductor boom, mandatory expenditures such as pensions, healthcare, and caregiving will inevitably continue to rise.
Government bond yields are already sounding an alarm. The 30-year Treasury bond yield has recently risen to 4.751%. This is the result of a combination of factors including increased government bond issuance, weak demand for long-term bonds, price instability driven by high oil prices, and rising global long-term interest rates. Korea is neither a reserve currency country like the United States nor in the same position as Japan, which has maintained low interest rates based on massive domestic savings. There is a higher likelihood that fiscal expansion and increased government bond issuance will lead to higher interest rates and greater interest burdens.
With next year's budget expected to exceed 800 trillion won, it is essential to reevaluate spending priorities and efficiency while strengthening the foundation for growth through fiscal reform. If we do not keep in mind the sustainability of public finances, Korea's tomorrow could become America's today.
in OPINION
