Japan PM Takaichi: We must exit from excessively tight fiscal policy

Japan Prime Minister (PM) Sanae Takaichi said during the European trading session on Monday that the economy needs to exit from fiscal tightness. However, she clarified that there won’t be reckless fiscal spending, as higher government expenditure will be backed by expanding Gross Domestic Product (GDP)-driven tax revenue.

Remarks

Japan's inflation, at 1.7%, is the lowest among G7 countries, with bright signs appearing in the wage outlook.

Japan's economy is starting to pick up momentum.

Japan must exit excessively tight fiscal policy, boost domestic investment, and put the economy on a growth path.

Japan will lose the chance to grow if we put off investment for the future.

Breaking away from years of excessive austerity.

Will submit bill for lowering 8% sales tax on food once meeting among lawmakers to debate the issue reaches an agreement.

Will lose growth chances if we postpone investment.

We will seek to increase tax revenue by expanding GDP, won't resort to reckless fiscal spending.

Important to set out fiscal target and how to achieve it.

Cutting number of lawmakers is the LDP election pledge.

Won't be swayed by fluctuations in opinion polls.

Impact of price relief measures to be felt gradually.

Watching the Middle East situation closely.

Can't say Japan has exited deflation fully.

Japan is no longer in deflation, if deflation is defined as sustained price declines, as CPI and GDP deflator are in an uptrend.

Japan hasn't met the conditions for the government to declare an end to deflation, which is defined as a state where there is no risk of the economy returning to deflation.

Market reaction

No major impact was seen in the Japanese Yen (JPY) following remarks from Japan PM Takaichi. At press time, USD/JPY trades 0.15% lower to near 163.60.