As a result of the Bank of Japan's large-scale asset purchases, the consolidated Japanese government borrows mostly at the floating rate from households and invests in longer-duration risky assets to earn an more than 3% of GDP in expectation. We quantify the impact of Japan's low-rate policies on its government and households. Because of the duration mismatch on the government balance sheet, the government's fiscal space expands when real rates decline, allowing the government to keep its promises to older Japanese households. A typical younger Japanese household does not have enough duration in its portfolio to continue to finance its spending plan and will be worse off. Low-rate policies tend to tax younger and less financially sophisticated households.
