The yen-dollar exchange rate, which fell to 151 yen per dollar at the end of October, returned to nearly 130 yen due to a slowdown in U.S. interest rate hikes or a revision of the Bank of Japan’s monetary easing policy. If the yen’s weakness calms down, rising import prices will be put on hold, reducing the burden on households.
On the other hand, the government’s fiscal management is expected to add to the difficulties in the future as the Bank of Japan has decided to reduce large-scale monetary easing measures.
If interest rates rise, the burden of paying government bonds worth about 8 trillion yen every year will increase. An official from the Japanese government expressed a sense of crisis to Jiji News, saying, “If the Bank of Japan turns to monetary tightening, it will inevitably affect fiscal management.”
Long-term interest rates, which were about 0.25% before the Bank of Japan decided to revise the easing, soared to 0.48% on the 21st. For the time being, it is likely to move around 0.5% of the upper limit that the Bank of Japan allows.
The government bond cost, which combines the repayment of government bonds and interest payments, is returned 24.3393 trillion yen based on the original budget in 2022. According to the government’s estimate, if interest rates rise by 1 percentage point than expected, government bond spending is expected to increase by 3.7 trillion yen in 2025.
Over the joint statement of the government and the Bank of Japan, which are the basis for large-scale financial easing, there is also a theory of review of goals and achievement periods within the government. The joint statement made by the Japanese government and the Bank of Japan in 2013 aims to achieve an inflation rate of 2% as soon as possible. Some are also talking about a change in the financial policy framework after the replacement of the governor of the Bank of Japan, scheduled for April next year.
