Japan prime minister Takaichi says will steadily restore fiscal sustainability

Will not pursue reckless fiscal policy that undermines market confidenceTo push bold investment through multi-year budgets and long-term fundsThe necessary spending will be funded through the initial budget as much as possibleWill steadily lower the debt-to-GDP ratio and restore fiscal sustainabilityTo maintain market trust and clarify concrete fiscal indicatorsWill ensure policy discipline is defined as one that is responsible and proactiveWell, all I can say is that actions speak louder than words. As a reminder, Takaichi’s policies are a mirror to Abenomics – which was designed to tackle deflation. And right now, Japan is squaring off against inflation pressures instead. Piling on debt to an already inflationary economy will force Japan’s debt to be far more burdening when rates move higher.And the other major point is that the math just doesn’t add up at the moment. This was a point already argued earlier this month here: Japan PM Takaichi says won’t resort to debt issuance to fund food sales tax suspensionAs mentioned then:”Even if Takaichi hides behind a tax surplus to fund this suspension of the food sales tax (instead of using it to pay down debt), it is effectively what one can describe as “shadow borrowing” as you are choosing to keep debt at a higher level than it would be. Essentially, this is also part of the Takaichi trade amid concerns that Japan’s national debt will explode higher.”So despite her calming words and her attempts to soothe markets, you can’t blame investors and traders for not buying into the gamble just yet. Essentially, Takaichi is trying to convince the naysayers that she can spend her way out this debt problem. However, history is not really on her side as this sort of solution has never worked out well for highly indebted economies in the past.
This article was written by Justin Low at investinglive.com.

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