Advertisement
Macroscope
Why the IMF is right to press Japan on its fiscal risks
The fiscal and monetary policies of advanced economies have global repercussions, and Takaichi’s expansionary fiscal agenda risks market pushback
3-MIN READ3-MIN
1
Listen
Anthony Rowley is a veteran journalist specialising in Asian economic and financial affairs.
The International Monetary Fund (IMF) is at last showing a bit of spirit. While it might not yet be attacking the egregious economic and financial antics of US President Donald Trump, it is at least turning its attention to the fiscal foibles of Japanese Prime Minister Sanae Takaichi.
This matters more now than has been the case in recent years, or even decades, because what Japan does in terms of its fiscal and monetary policy is beginning to have international repercussions.
What political leaders like Takaichi or Trump don’t seem to realise is that they cannot charge ahead with populist policies on the domestic front without regard to their global impact. The discipline – though some might call it tyranny – of financial markets sees to that.
This is especially true of Japan, which for much of the post-war era remained a closed economy on the fiscal front because institutions such as the Bank of Japan (BOJ) and the Government Pension Investment Fund absorbed most government debt. Japan could not afford to thumb its nose at foreign bond investors, but neither did it need continually to look over its shoulder at foreign investor reaction when it wanted to issue government debt.
Select Voice
Select Speed
1x
AI-generated voice