www.bloomberg.com
Prime Minister Sanae Takaichi faces a difficult challenge in funding a proposed sales tax cut without reigniting fears of fiscal recklessness, reminiscent of the market turmoil caused by former UK Prime Minister Liz Truss. With Japan’s debt already exceeding 260% of GDP, Takaichi lacks a clear, risk-free funding mechanism. While she has ruled out issuing new deficit-financing bonds, she faces pressure to find alternative revenue sources or spending offsets. Investors remain wary of any fiscal expansion that seems unanchored by responsible budgeting, fearing that such policies could destabilize Japan’s bond market and currency.
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