For Japan, Maintaining Fiscal Trust and Achieving Nominal Economic Expansion

Prime Minister Sanae Takaichi’s Eventful Start

Since taking office in October, Prime Minister Sanae Takaichi has faced a remarkably turbulent first five months. The new administration’s early days were characterized by significant market fluctuations. Budget plans introduced late last year sparked worries about increasing deficits and a greater reliance on borrowing, especially as there were concerns that further spending measures might be necessary to gain opposition backing. Additionally, the campaign promise to halt Japan’s consumption tax heightened expectations of more government borrowing, which led to renewed instability in the bond markets by late January.