Kono Taro (河野太郎) called for consideration of funding sources when interest rates rise in discussions over tax cuts based on campaign pledges. The 10-year Japanese government bond yield, a benchmark for long-term interest rates, reached 2.93%, its highest level in 30 years, and the Ministry of Finance expects interest payments to reach approximately ¥13 trillion next fiscal year.
In Japan, interest rates have been rising against a backdrop of mounting inflationary pressure and the Bank of Japan’s shift in monetary policy, with long-term interest rates reaching 2.93% on 17 August. This was a sharp increase from around 2.2% previously, raising concerns about the impact on the government’s interest expenses.
Kono Taro (河野太郎) argues that, when pursuing tax cuts, the government should scrutinize how to fund the increase in debt-servicing costs and whether tax revenue alone would be sufficient. He also noted that rising prices could boost consumption and said the shortfall in funding should not be left ambiguous.
The article discusses the relationship between the government’s fiscal management and its tax-cut policy amid rising interest rates, and points out that the process for deciding on a 1% tax cut was not smooth from the outset. It explains that the difficulties involved in coordinating among political and business circles and organizing the issues were factors behind this.
It also suggests that, depending on future market conditions, there could be situations in which a weaker yen cannot be halted even if measures such as coordinated intervention by Japan and the United States prove effective, and says that the authorities need to closely monitor market developments.