Takaichi pledges fiscal discipline as Japan’s debt bill rises

Japanese Prime Minister Sanae Takaichi pledged on Monday to control the country's bond issuance and respond swiftly to market turbulence, addressing investor concerns over Japan's escalating public debt. Takaichi emphasized the importance of fiscal sustainability, even as the government increases spending to enhance growth potential.

The prime minister outlined plans to attract private investment in growth sectors through substantial, long-term fiscal expenditure while maintaining a lid on annual bond issuance. Funding costs are rising as the Bank of Japan raises interest rates and reduces bond purchases to pull the economy away from prolonged stimulus. Japan's public debt, approximately double the size of its economy, is the largest among developed nations.

Takaichi will present a two-year tax cut on food items in April, but the revenue shortfall has sparked bond sell-offs due to the lack of detail on how to fill the gap. The government is preparing its budget for the next year, with ministries seeking record spending levels. In addition, Tokyo will allocate multi-year funds for strategic economic security initiatives.

The administration has been striving to dispel the notion that its fiscal policy is reflationary or relying on the Bank of Japan to refrain from raising interest rates.