Reference News Network, December 1st report: After taking office, Japanese Prime Minister Takahashi Sanae has been expected by the public to pursue a "strong economy." However, her signature economic policy, known as "Sanae Economics," has already reached an important turning point from the beginning.
Given the situation of insufficient demand and rising inflation, introducing massive economic stimulus measures recklessly would only lead to increased pressure on the yen's depreciation and interest rates, and potentially result in counterproductive effects.
Will Takahashi break through this impasse, or will she become confused and waver due to the "reaction force" of her policies? This will be a severe test.
In 2012, the second Abe Shinzo government was established. At that time, the Japanese economy was in deflation, and the government introduced "Abenomics," mainly consisting of the "three arrows," with its core being an unconventional monetary easing policy aimed at escaping deflation.
Takahashi proposed a "responsible proactive fiscal policy," and recently began to clearly display her "Takahashi style." She appointed economists from the "re-inflationist" faction. This move caused market participants to begin to be alert to the risk of fiscal deterioration that the Takahashi government might bring. Subsequently, the Takahashi government also announced an economic measure exceeding 20 trillion yen, the largest since the economic contraction caused by the pandemic.
The opposition still remains in a deflationary mindset, repeatedly urging the government to expand tax cuts and subsidy policies. It can be said that fiscal expansion has become an inevitable trend to some extent.
However, the government's measures to reduce oil prices and electricity bills lack targeting. The previous government's subsidy policy, which was unable to be stopped for political reasons, has continued like accumulated snow, constantly pressuring the budget. Japan's economy relies on public support, lacks the drive to improve productivity and innovation, and thus its growth pace will slow down as a result.
If the government continues to hold the view that "the bigger, the better," market pressures such as the depreciation of the yen and the rise in bond yields will repeatedly occur. No matter how the Takahashi government explains it, once the market views this stance as "irresponsible lax fiscal policy," its proactive policies may backfire.
If the depreciation of the yen leads to higher prices for imported goods, and various factors cause inflation to intensify, public dissatisfaction with the government's price measures will be difficult to quell. And if the government increases fiscal spending again to cater to public opinion, it will create a vicious cycle.
To break this situation, the government should not make vague statements, nor should it rely on optimistic and naive assumptions; instead, it should clarify a clear path that can maintain fiscal discipline in the medium to long term. (Translated by Ma Xiaoyun)
This article was published by the "Nikkei Shimbun" on November 24th, titled "The Turning Point of Sanae Economics," authored by Kanoo Mutsuo, the chairman of the newspaper's comment committee.
Original: toutiao.com/article/7578713956915610150/
Statement: The article represents the views of the author.