The only way to sustainably stabilise the yen and ensure a level of interest rates that promotes solid growth is to raise taxes, cut spending or sell some of the government’s abundant assets, which includes privatising state-owned companies.
Japan’s net debt — after netting out all the government’s assets — stands at only 130 per cent, far below the gross number. Japan get’s no credit for this much lower number, because no one in markets believes assets will ever be sold on any meaningful scale due to the power of vested interests. Much can be done to right the ship. But that requires the new prime minister to make a true break with the past.
Even a small signal in this direction from Takaichi would go a long way. That’s because markets are currently uniquely attuned to the growing risk that governments around the world may ultimately try to inflate away unsustainably high debt levels.
by HibasakiSanjuro