Is the Japanese economy about to crash? This once unthinkable prospect is now very much thinkable as concerns grow, and the cost of borrowing rises, in response to the bold but, to many, bewildering economic plans of prime minister Sanae Takaichi.
It is a question of huge import, for if the Japanese economy collapses the consequences around the globe could be grave.
Takaichi, who faces an election on 8 February – where she will hope to boost her slender coalition dependent majority towards outright power – has pledged to boost the economy to the tune of 21 trillion Yen (£100 billion) while at the same time cutting taxes, most significantly eliminating the 8 per cent sales tax on food for two years.
Borrowing costs surged to their highest levels in decades last week (40 year bonds hit 4.2 per cent) at the prospect of her plans becoming reality.
✍️ Philip Patrick
https://spectator.com/article/could-the-japanese-economy-crash-out/?utm_source=reddit&utm_medium=social
4 Comments
Could? It’s utterly inevitable. No one will stop it because that would mean someone in power speaking up, and that would damage the “wa.” Better for a 1929-style depression to destroy the country than to “cause trouble.”
If Japan faced a real bond crisis, domestic institutions would likely repatriate capital, forcing sales of foreign assets and tightening global liquidity.
That would create significant global stress ,though a total systemic collapse is unlikely given Japan’s monetary control.
If the economy were to crash out, how do you explain the incredible performance of the stock market since October?
No, you can’t.
Not going to happen. Majority of debt is held within. It’ll just get paid off, and nothing much will move outside Japan