Takaichi Vows Fiscal Discipline Amid Japan’s Rising Public Debt

Japanese Prime Minister Sanae Takaichi has pledged to maintain fiscal discipline despite rising public debt, which is now the largest among developed nations. Speaking to parliament on Monday, Takaichi emphasized the need for fiscal sustainability as the government increases spending to boost economic growth. She noted that the government would control bond issuance and respond swiftly to market turbulence to reassure investors.

The government aims to attract private investment in key growth sectors through long-term fiscal expenditure, while keeping annual bond issuance in check. Takaichi’s remarks come as Japanese government bond (JGB) yields have risen, with the 30-year bond hitting a record high of 4.235% on Monday due to concerns over increased debt issuance and inflation from the Middle East war.

Japan’s public debt is roughly twice the size of its economy, and funding costs are increasing as the Bank of Japan raises interest rates and reduces bond purchases. The government is also preparing next year’s budget, with ministries seeking record spending levels. Takaichi reiterated that the administration would implement policies steadily and communicate them clearly to the public and markets.

Some experts, however, disagree with the government’s approach. Former Bank of Japan deputy governor Masazumi Wakatabe argued that the recent rise in JGB yields was due to expectations of further rate hikes rather than concerns over Japan’s finances. He stressed the need for close coordination between the government and the central bank on monetary policy.