Takaichi pledges fiscal discipline as Japan's debt bill rises

Japanese Prime Minister Sanae Takaichi on Monday pledged to “control” bond issuance and respond swiftly to market turbulence, seeking to reassure investors alarmed by Japan’s deteriorating public finances.

In a policy speech to an extraordinary session of parliament convened on Monday, Takaichi said “fiscal sustainability is obviously a prerequisite” for the government’s “responsible and proactive” fiscal policy, even as it ramps up spending to bolster growth — including by reviewing existing tax breaks and subsidies. The government would draw private investment into growth areas through “massive, long-term fiscal expenditure deployed in a well-planned, predictable manner,” while keeping annual bond issuance in check, calibrated against tax revenues, interest rates and market developments.

“If the economy and markets make unexpected moves, we will scrutinise their impact and respond nimbly as needed,” she added.

The remarks come amid mounting concern in Tokyo over Japanese government bond yields: the 30-year JGB yield hit a record high of 4.235 per cent on Monday on fears of increased debt issuance and inflation worries fuelled by the Middle East war. Japan’s public debt stands at roughly twice the size of its economy, the largest in the developed world, while the Bank of Japan is raising interest rates and tapering bond purchases. Takaichi previously told the Yomiuri newspaper the government would aim to cap new bond issuance at ¥40 trillion (about $255 billion) for the next fiscal year.