Can Japan avoid a Liz Truss-style shock as its PM embarks on a giant spending spree?
📰 source: theguardian_business · 💼 business
japan's prime minister sanae takaichi unveiled a plan to invest ¥370tn in 17 industrial sectors by 2040, but markets are rattled by the lack of funding details. the unfunded spending spree echoes liz truss's 2022 uk budget shock, which triggered a bond market crisis. japanese government bond yields hit 2.8%, the highest in 29 years, and the yen weakened to 163 per dollar, a four-decade low. the stock market fell after the announcement, with major companies like sony and toyota hit.
takaichi's coalition holds a two-thirds majority and has pressured the bank of japan to keep rates low, but the boj has raised its policy rate to 1%. inflation is ticking up due to yen depreciation and higher oil prices from the middle east conflict. economists doubt the plan can achieve its 1% growth target, as japan faces stiff competition from china in high-tech manufacturing. investors fear a 'liz truss moment' if financing details remain unclear, with the yen under pressure and debt-to-gdp already near 230%.
why it matters: unfunded japanese spending spree risks a market shock similar to uk's 2022 crisis, testing investor confidence in asia's second-largest economy.
source: theguardian_business
sentiment: -0.60 · impact: 0.70