Connect with us

Hi, what are you looking for?

Alive Business PlanAlive Business Plan

Investing

Japan must avoid issuing debt to fund fresh spending, IMF says

By Leika Kihara

TOKYO (Reuters) -Japan must fund any additional spending plans within its budget rather than issuing more debt, the International Monetary Fund said on Friday, urging the government to get its fiscal house in order as the central bank starts to raise interest rates.

“Given the fact that monetary policy normalisation is happening, it puts the onus on the fiscal side to actually embark on consolidation, which is, in my opinion, long overdue,” Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, told Reuters in an interview.

Japanese Prime Minister Shigeru Ishiba has pledged to compile another large-scale spending package to cushion the blow to households from rising cost of living. He has not commented yet on how the spending will be funded.

“Any kind of support you’re providing should be a lot more targeted, and any kind of new initiative should be financed within the budget,” Srinivasan said. “You should not be increasing more debt to provide for any new initiative.”

On monetary policy, Srinivasan said the Bank of Japan should raise interest rates in a “gradual” and “data-dependent” way as there were both upside and downside risks to inflation.

The BOJ maintained ultra-low interest rates on Thursday but said risks around the U.S. economy were somewhat subsiding, signalling that conditions are falling into place to raise interest rates again.

BOJ Governor Kazuo Ueda has said the central bank will keep raising interest rates, currently at 0.25%, if Japan makes progress towards sustainably achieving its 2% inflation target.

“I think the BOJ is doing the right thing. It’s doing everything possible to make sure that inflation and inflation expectations are anchored at 2% over the policy horizon,” Srinivasan said.

A prolonged period of ultra-low rates in Japan has been partly behind the yen’s recent downturn. The currency weakness in turn is hurting retailers and households by pushing up the cost of importing fuel and raw material.

Japanese authorities have said the yen’s recent moves were “one-sided” and sharp, issuing a warning to investors against pushing down the currency too much.

Srinivasan said currency markets could experience some volatility when there was “so much uncertainty” about the economic outlook of Japan and the United States, and factors that could magnify the moves such as an unwinding of yen carry traders.

“But broadly speaking, I think they’re fully committed to the flexible exchange rate regime,” he said of Japanese authorities’ stance on yen moves.

Japan’s public debt, at twice the size of its economy, is the largest among major nations due to huge spending packages delivered in the past and the rising social welfare costs for a rapidly ageing population.

This post appeared first on investing.com
Become a VIP member by signing up for our newsletter. Enjoy exclusive content, early access to sales, and special offers just for you! As a VIP, you'll receive personalized updates, loyalty rewards, and invitations to private events. Elevate your experience and join our exclusive community today!

    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    You May Also Like

    Latest News

    The Gateway Pundit, a far-right website, published a note from its editor on Saturday acknowledging that two election workers in Georgia did not engage...

    Latest News

    New majorities in Congress, particularly when the incoming party has a new leader, offer the rare chance for the institution to take a breath...

    Latest News

    Sister Stephanie Schmidt had a hunch about what her fellow nuns would discuss over dinner at their Erie, Pennsylvania, monastery on Wednesday night. The...

    Investing

    JAKARTA (Reuters) -Indonesia has asked Alphabet (NASDAQ:GOOGL)’s Google and Apple (NASDAQ:AAPL) to block Chinese fast fashion e-commerce firm Temu in their application stores in...



    Disclaimer: alivebusinessplan.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.


    Copyright © 2024 alivebusinessplan.com