Japan's Takaichi: National debt level is still high
Japanese Prime Minister Sanae Takaichi said on Tuesday that national debt level is still high, adding that it may be possible to cut the amount of new bond issuance for fiscal year 2026 budget.
Key quotes
Responsible proactive fiscal policy does not mean irresponsible bond issuance or tax cuts.
Japan national debt level is still high.
It may be possible to curtail the amount of new bond issuance for fiscal year 2026 budget.
Bank of Japan rate hike was carried out to stably and sustainably achieve 2 percent inflation target.
Market reaction
The USD/JPY pair is losing 0.59% on the day to trade at 156.07 at the press time.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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