Japan's economy is facing a real test 🚧 as its monetary and fiscal policies pull in opposite directions.
On one hand, Bank of Japan Governor Kazuo Ueda has hinted at interest-rate hikes to tackle persistent inflation—October’s core CPI jumped 3.0% year on year, staying above the 2% goal for over four years. With the yen slipping to around ¥157 per US dollar, tighter rates are seen as a must to curb imported price surges and steady the currency.
On the other hand, the Ministry of Finance’s preliminary FY2026 budget (Apr 2026–Mar 2027) allocates a record ¥32.38 trillion for government bond spending—that’s money to service Japan’s huge debt and its interest—up from ¥28.22 trillion this year 🤯. This expansionary fiscal move contrasts sharply with the BOJ’s tightening stance.
Last week, on December 17, the 10-year government bond yield spiked to 1.978%, its highest level since June 2007. With debt already through the roof and growth still fragile, this policy tug-of-war risks adding stress to markets and household budgets alike.
Looking ahead, Japan needs to strike the right balance—boosting recovery without fanning inflation or deepening the debt crisis. All eyes are on the BOJ’s next decision and the government’s budget talks to see which way the scales tip in 2026 ⚖️📈.
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Japan's economy faces multiple tests amid policy crosscurrents
cgtn.com
