Japan's Takaichi aims to reassure markets with spending policy ongoing

Japanese Prime Minister Sanae Takaichi pledged on Monday to control bond issuance and swiftly respond to market turbulence, aiming to reassure investors about Japan's worsening public finances. She emphasized that fiscal sustainability is crucial in pursuing a responsible and proactive fiscal policy. Takaichi's comments came amid rising concerns over the country's public debt, which is the largest in the developed world at roughly twice the size of its economy.

The 30-year Japanese government bond yield reached a record high of 4.235% on Monday, driven by worries about increased debt issuance and inflation fears stemming from the Middle East conflict. The government plans to boost growth potential by reviewing existing tax breaks and subsidies, while keeping a tight lid on annual bond issuance calibrated to tax revenues, interest rates, debt financing costs, and economic and market conditions.

Takaichi assured that the government will scrutinize any unexpected moves in the economy and markets, responding nimbly as needed. Fiscal policy is expected to dominate parliamentary debates in Japan as global bond yields rise due to heightened concerns over advanced economies' fiscal health.