The message is certainly interesting with Takaichi definitely trying to soothe Japanese markets more than anything else with this one. After already enacting a roughly ¥18 trillion supplementary budget for the current fiscal year, her government is expected to go through with a ¥122 trillion budget for the next fiscal year starting April.
Her fiscal dovishness has come under intense scrutiny, not least with the selloff in Japanese bonds and the yen currency. And she certainly knows that very well.
But in trying to shore up confidence and not prevent an overbearing fallout, she has to play her part in saying the things she needs to say and that’s what we’re seeing.
Takaichi mentions to Nikkei that Japan’s national debt level is still high and that she rejects the idea of “irresponsible bond issuance or tax cuts”.
It’s all mainly an attempt to try and calm down investors, as JGB yields continue to surge higher while the yen currency suffers.
So far today, things are at least looking a bit better but this is akin to just putting a plaster on the hole on the dam. Her big picture plans remain clear for all to see and there’s no way she will be backing down from that. I mean, she’s even trying to get the BOJ on board so it speaks a lot to her conviction.
USD/JPY is down 0.6% on the day to 156.07 while 10-year JGB yields are down 3 bps from yesterday to 2.04%. The latter hit a high yesterday of 2.10%, just for some context
