Japan's Takaichi insists $135 bn stimulus fiscally 'responsible'
Source: AFP
Japanese Prime Minister Sanae Takaichi insisted that a $135 billion stimulus package approved Friday was fiscally responsible and that she would reduce the country's colossal debt burden.
The 21.3 trillion yen outlay comes as the government looks to kickstart growth in the world's number-four economy as people grow increasingly worried about rising prices.
However, expectations that the new premier would embark on a big-spending spree has pushed yields on Japanese government bonds to record highs this week and put pressure on the yen.
"Responsible proactive fiscal policy means a forward-looking fiscal strategy and does not aim to pursue scale recklessly or expansively," Takaichi said in Tokyo.
"By thoroughly implementing the concept of wise spending, we will strategically deploy fiscal measures to protect the lives of our citizens and build a strong economy," she added.
"While fostering a strong economy and increasing the growth rate, we will reduce the government debt-to-GDP ratio, achieve fiscal sustainability and secure trust from the market."
Japan's current debt to GDP ratio is around 250 percent, one of the highest among major economies.
The bundle of measures from Japan's fifth premier in as many years includes energy subsidies and tax cuts to ease the pain of rising prices on Japanese households.
Takaichi came to power last month with a pledge to fight inflation as anger over rising prices helped undo her predecessor, Shigeru Ishiba, who was in office barely a year.
But a weaker yen raises prices of imports for resource-poor Japan, which relies heavily on foreign food, energy and raw materials to power its economy.
Finance Minister Satsuki Katayama on Friday dropped the strongest hint yet that the government may intervene to support the yen, saying it will take "appropriate action against disorderly (foreign exchange) moves".
"Japan has been engaged in expansionary economic policies for so long without being able to stimulate the economy," said Margarita Estevez-Abe, an analyst at Syracuse University's Maxwell School.
"Meanwhile, Japan's public debts increased. We are already seeing the negative reactions from the market... Further depreciation of the yen will hit ordinary Japanese households with higher prices," she told AFP.
Diplomatic spat
Official data earlier showed core inflation, which excludes fresh food, rose 3.0 percent year-on-year in October from 2.9 percent in September.
Illustrating the strain on consumers, rice prices were 40 percent higher than last year, although the rate of inflation for the staple has slowed considerably in recent months.
The reading came days after figures showed the economy shrinking 0.4 percent in the third quarter, the first contraction since the first three months of 2024.
Further concern for Asia's second-biggest economy comes from Japan's ongoing diplomatic spat with China following comments by Takaichi about Taiwan.
China has summoned Tokyo's ambassador and advised its citizens against travel to Japan, where Chinese account for the largest number of foreign tourists.
Media reports this week said Beijing will also suspend imports of Japanese seafood. Neither government has confirmed the move.
The row was sparked after Takaichi suggested Japan could intervene militarily in the event of any attack on Taiwan.
China claims democratic Taiwan as part of its territory and has threatened to use force to bring the self-ruled island under its control.
Takaichi on Friday insisted that Tokyo's stance on Taiwan was "unchanged" and that she wanted "constructive and stable" relations with Beijing.
The US State Department said that Washington's "commitment to the US-Japan Alliance and to Japan's defence, including the Japan-administered Senkakus, is unwavering".
The disputed Senkaku Islands, known as the Diaoyu in China, are a frequent flashpoint and China on Sunday deployed coast guard vessels in waters around the uninhabited islands.
"We firmly oppose any unilateral attempts to change the status quo, including through force or coercion, in the Taiwan Strait, East China Sea, or South China Sea," State Department spokesman Tommy Pigott posted on X.
Source: AFP
