Debt sustainability has become increasingly important in advanced economies as they grapple with rising public debt levels, challenging monetary policies, and shifting investor expectations. This paper examines Japan’s fiscal position from the perspectives of the standard debt sustainability analysis and the asset pricing approaches. The findings suggest that several factors contribute to mitigate debt sustainability risks. Moreover, under favorable conditions, the present value of government debt is consistent with its current market valuation, as it accounts for the country’s capacity to repay its debt relying on future primary surpluses and a reduction of its debt stock. However, as the Bank of Japan normalizes monetary policy and scales back from large-scale bond purchases, the sustainability of Japan’s debt may come under increasing pressure. These findings underscore the importance of proactive fiscal adjustments to steer the economy toward long-term fiscal stability and enhanced resilience against financial shocks.