At the 8 October plenary session of the House of Representatives, Prime Minister Takaichi (高市) said that the economy was not in a phase requiring reflationary policy, while explaining that the government would maintain responsible proactive fiscal policy. With the yen weakening and government bond prices falling, the market's reaction and the consistency of the policies are being questioned.
At the 8 October plenary session of the House of Representatives, Prime Minister Takaichi (高市) said that the economy was not in a phase requiring reflationary policy, explaining that the policy of achieving a virtuous economic cycle and increasing tax revenue through higher employment and incomes differed from reflationary policy.
At the same time, the administration's flagship policy of responsible proactive fiscal spending is to be maintained, raising questions about the consistency of its policies.
In reality, the yen has weakened and government bond prices have fallen, with the yield on 10-year Japanese government bonds rising to around 3%. Higher interest rates could cause government bond prices to decline, and the resulting increase in the fiscal burden is a factor heightening market concerns.
Against the backdrop of the differences between reflationary policy and proactive fiscal policy, the issue is whether fiscal stimulus under inflation will lead to higher productivity. The relationship between the Bank of Japan's monetary policy and fiscal spending will be a focus going forward.