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“QUIET EMERGENCY”
With the Bank of Japan expected to keep hiking interest rates, this debt mountain will also cost more and more, SMBC Nikko Securities economist Yoshimasa Maruyama said.
Tax cuts “must be accompanied by a permanent source of revenue to fill the gap”, Maruyama wrote in a research note.
Ishiba, 67, has promised to revitalise depressed rural regions and to address the “quiet emergency” of Japan’s shrinking population with measures to support families such as flexible working hours.
Going forward, businesses worry that the need to curry favour with opposition parties means Ishiba will avoid reforms needed to improve Japan’s competitiveness.
There are also concerns that the government may pressure the Bank of Japan to go slow on raising interest rates, even if this leads to a weaker yen.
Government data on Friday put headline inflation last month at a modest 2.3 per cent, but it showed rice up nearly 60 per cent year-on-year, revealing the pain for ordinary Japanese.
The price of the staple rocketed because of hot weather and water shortages and after a “megaquake” warning in August led to hoarding. Record inflows of hungry tourists were also blamed.
Separately, Ishiba has promised to spend 10 trillion yen through 2030 to boost Japan’s semiconductor and artificial intelligence sectors and help the nation regain its tech edge.
The new stimulus package may include plans for the government to buy a 200-billion-yen stake in next-generation chip venture Rapidus, according to media reports.
After dominating tech in the 1980s, “Japan had a quite a long period of almost just sitting back and observing a lot of this innovation, particularly when it comes to artificial intelligence”, said Kelly Forbes at the AI Asia Pacific Institute.
“What we have seen in the last maybe two to three years is Japan really waking up to the potential” of such developments, she told AFP.
