Econintersect: The governor of the Bank of Japan (BofJ) has taken his opposition to the aggressive monetary and fiscal stimulus plans of the country’s newly elected prime minister to the Japanese parliament. BofJ governor Haruhiko Kuroda told parliament Thursday (28 March 2013) that the the level of government debt is “not sustainable” and the ratio of debt to GDP expected this year (245%) is “abnormal“. (Quotes from Financial Times.) The new prime minister, Shinzo Abe is pursuing a new spending package of ¥10.3 trillion ($109 billion). He has also asked the BoJ to buy more government bonds.
This apparent conflict comes only two days after Mr. Abe had made a reassuring statement about his commitment to fiscal reform even while taking aggressive action to end deflation. From Nasdaq.com:
“The government is ready to take bold fiscal policy steps if necessary, depending on economic conditions,” Mr. Abe said during a parliamentary meeting when asked about whether he intends to increase Japan’s already record budget size.
Mr. Abe, however, reiterated the government’s commitment to fiscal reform, noting that it will adhere to the deficit cutting goals set out by the previous government.
As GEI News reported last night the concern expressed by Mr. Kuroda is not reflected at present in bond prices which are near an all-time high. Those raising concerns point out that if interest rates were to rise the burden of interest payments could be more than the Japanese economy could bear.
Sources:
- Kuroda warns Japan debt ‘not sustainable’ (Ben McLannahan, Financial Times, 28 March 2013)
- Japan’s Abe Hints at Stimulus to Offset Tax (Dow Jones Business News, Nasdaq.com, 26 March 2013)
- Japan: Bonds Near Record (GEI News, 27 March 2013)
