The Japanese government is promoting a shift in its economic growth model, moving away from reliance on debt financing towards an investment-driven development strategy, with a commitment of over $330 billion earmarked for artificial intelligence and the semiconductor sector.
On January 20, Japanese Finance Minister Shunichi Suzuki stated at the World Economic Forum in Davos that the government's fiscal dependence on debt is decreasing, domestic optimism regarding structural reforms is growing, and the economy is transitioning towards a direction focused on "priority growth." She emphasized the need for a significant shift towards investment to stimulate the economy while striving to maintain fiscal sustainability.
Addressing the recent rise in Japanese government bond yields, she indicated that Japan will persist in maintaining fiscal sustainability even as it expands fiscal expenditures, and has clearly communicated to the financial community and investors the government's determination to achieve long-term stability in public finances.
Concurrently, she announced that Japan plans to allocate over $330 billion, with a primary focus on the artificial intelligence and semiconductor fields. Following these remarks, the yen strengthened briefly, with the USD/JPY pair trading at 157.65.
Earlier, Sanae Takaichi signaled a clear end to austere fiscal policies and a turn towards more expansive fiscal measures, triggering a massive sell-off in the government bond market and causing yields to surge across the board. The 10-year Japanese Government Bond yield rose by 8 basis points to 2.350%, reaching its highest level since 1999; the 30-year JGB yield climbed 26.5 basis points to 3.875%.
According to a Xinhua News Agency report, Japanese Prime Minister Sanae Takaichi stated at a press conference on the 19th that she would dissolve the House of Representatives on January 23 and seek a voter mandate to continue governing, with an election for the House of Representatives scheduled for February 8. The term for the current members of Japan's House of Representatives was originally set to expire in October 2028.
At the press conference, Takaichi stated bluntly: "We will end excessively tight fiscal policy... We must break free from the constraints of excessive tightening and boldly invest in risk management."
Takaichi also revealed that a series of "far-reaching" bills would be discussed at an upcoming meeting, hinting that her subsequent policy agenda might involve significant structural reforms or economic adjustments. She pointed out that the Japanese government will terminate overly restrictive fiscal policies, and that strategic fiscal spending will increase employment and household income, thereby generating higher tax revenues. Bold investment in risk management is essential, and the shackles of excessive fiscal tightening must be cast off. Preparations will begin to cancel the two-year-old consumption tax on food, with the funding for this tax reduction still under consideration. Subsidies might be cut, and the overall budget will be revised. The sustainability of Japan's fiscal condition will be ensured by reducing the nation's debt-to-GDP ratio.
Japan is positioning artificial intelligence and the semiconductor sector as strategic investment priorities. On January 16, Japanese and ASEAN ministerial-level officials in the digital field held a meeting in Hanoi, where both sides confirmed they would deepen cooperation in areas such as talent development and technological R&D to jointly promote the advancement of artificial intelligence. The participants drafted a joint statement aimed at collaborating to develop AI models that reflect the respective cultures, languages, and national conditions of each country, and to strengthen the cultivation of young developers.
Japanese Minister for Internal Affairs and Communications, Yoshimasa Hayashi, stated that Japan hopes to further strengthen its cooperative relationship with ASEAN to help address regional challenges and promote economic growth. He also noted that Japan would use this opportunity to enhance its credibility and influence in the global AI field.
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