Japan PM’s spending plan raises investor concerns, comparisons to Truss
8 reported2 unconfirmed
International investors are questioning where Japan's Prime Minister Sanae Takaichi will find the ¥370tn (£1.7tn) needed for her plan to invest in 17 industrial sectors by 2040, according to a report from The Guardian. The scale of spending has prompted fears within her own party of a Liz Truss-style economic shock, and financial markets have reacted with downward steps since the proposals were unveiled in June. The plan aims to lift Japan's productive capacity, keep the country at the forefront of AI, and reduce dependence on trade with China. Domestic and international lenders have pushed Japanese government bond interest rates to 2.8%, the highest in 29 years, while the yen has fallen to 163 to the US dollar, a four-decade low. Analysts, including Kelvin Lam of Pantheon Macroeconomics, have cited a lack of detail about how the spending will be financed as a key concern. Takaichi's conservative coalition secured a two-thirds majority in the lower house after a snap election in February, and the plan targets sectors such as AI, semiconductors, biotech, defence, energy, and shipbuilding.
What’s reported
The plan involves investing ¥370tn (£1.7tn) in 17 industrial sectors by 2040.
Many in Takaichi's own party fear a Liz Truss-style economic shock.
The stock market has reacted with downward steps since the proposals were unveiled in June.
Japanese government bond interest rates have risen to 2.8%, the highest in 29 years.
The yen has fallen to 163 to the US dollar, a four-decade low.
Japan's core inflation has remained below the BoJ's 2% target over the last four months.
Takaichi's coalition secured a two-thirds majority in the lower house after a February snap election.
The plan targets AI, semiconductors, biotech, defence, energy, and shipbuilding.
Open questions
Where the ¥370tn in funding will come from.
Whether the plan will achieve its goal of more than doubling Japan's economic growth to over 1%.
Key figures
Sanae Takaichi, Prime Minister of Japan
Kelvin Lam, Asia specialist at Pantheon Macroeconomics
Sources: The Guardian
