Tokyo, Oct. 5 (Jiji Press)–Concerns about Japan’s fiscal deterioration remain after Prime Minister Sanae Takaichi vowed in a parliamentary policy address Monday to win market trust. Amid rising bond yields, investors are closely watching whether Takaichi’s administration will take concrete action to realize her signature “responsible and proactive” fiscal policy of balancing economic growth and fiscal sustainability, as the government is beginning to compile its initial budget for fiscal 2027. “We will take a straightforward approach to enhance market confidence,” Takaichi said in the policy address at the start of an extraordinary Diet session. She pledged to carefully explain the results of her policies to the public and market participants. Since her administration was launched last October, financial markets have closely monitored the prime minister’s remarks and policy management. In light of Takaichi’s cautious stance toward rate hikes by the Bank of Japan, as well as fears of increased government bond issuance due to her expansionary fiscal policy, the benchmark 10-year government bond yield rose to 3.115 pct on Sept. 25, the highest level since August 1996. In the currency market, the yen has weakened to largely offset a coordinated Japan-U.S. intervention at the end of July aimed at preventing the Japanese currency’s further depreciation. Amid selling pressure on government bonds and the yen, U.S. Treasury Secretary Scott Bessent said on Sept. 1 that Japan should end its reflationary policy aimed at overcoming deflation through monetary easing and fiscal spending. U.S. President Donald Trump also expressed concerns about the weak yen at a meeting with Takaichi on Sept. 22, in a sign of increased pressure on Japan’s economic management. Takaichi has instructed Finance Minister Satsuki Katayama and economic revitalization minister Minoru Kiuchi, whom she retained in their respective posts in last month’s cabinet reshuffle, to strengthen communication with financial markets. Katayama vowed to “continue to explain constantly and patiently” about the government’s JGB issuance plan to ensure market confidence. Nevertheless, market players remain keen to wait and see whether the government can actually maintain fiscal discipline while pursuing a growth-oriented, aggressive fiscal policy. “Unless the government demonstrates its intentions through concrete actions and figures, the market may not have a sense of security,” said an official at an asset management firm. END [Copyright The Jiji Press, Ltd.]
