Japan's Minister for Growth Strategy, Minoru Kiuchi, has defended the nation's spending plans, asserting they will deliver a long-term boost to the yen while pushing back against market concerns regarding the country's fiscal health.
In an interview on Monday, Kiuchi stated, "Japan's fiscal policy is not as expansionary as many believe, because we place a strong emphasis on sustainability." He further highlighted that Japan is actively shifting toward a measurement approach that aligns with "international standards," evaluating debt levels based on their ratio to economic output.
Prime Minister Shigeru Ishiba's series of spending initiatives aimed at revitalizing the economy have sparked worries about funding sources. Kiuchi downplayed the financial burden of one of Ishiba's unprecedented plans, which allocates 370 trillion yen ($2.3 trillion) over 14 years to key industries. He argued that supporting sectors like artificial intelligence, semiconductors, and gaming is essential for Japan's economic growth, defending the roadmap he helped formulate.
Speaking in Tokyo, Kiuchi explained that a responsible and proactive fiscal policy would benefit both the economy and the yen. "As investment in Japan and yen-denominated assets increases, demand for the yen will naturally rise as well," Kiuchi said. This comes after a rare joint intervention by the U.S. and Japan in the currency market to boost the yen, though its effects are starting to fade.
Regarding a two-year consumption tax reduction plan, Kiuchi sees little difficulty in financing it. The plan is expected to cost roughly 5 trillion yen annually. "Raising 5 trillion yen is not that difficult," he noted, pointing out that large-scale adjustments to government fiscal balances would generate savings to cover the cost.
On monetary policy, Kiuchi stated that the Bank of Japan is currently performing well, a comment that may signal he is not strongly opposed to an interest rate hike in the near term. Market expectations for a rate increase by the Bank of Japan in September or October continue to build.
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