PM likely to scale back fiscal goals to keep inflation in check

Rise in living costs remains a major challenge in Japan, writes Satoshi Iizuka

- writes Satoshi Iizuka

Japan's new Prime Minister Sanae Takaichi delivers her first policy speech in parliament in Tokyo yesterday.

(REUTERS)

Newly elected Japanese Prime Minister Sanae Takaichi is expected to scale back her initial plan to spur demand with aggressive fiscal spending to avert a possible spike in inflation.

Ms Takaichi has been a vocal advocate of “Abenomics’, a mix of government spending and monetary stimulus pursued by former premier Shinzo Abe, but has committed to evolving her economic policies as part of the ruling Liberal Democratic Party (LDP)’s coalition with the Japan Innovation Party (JIP).

The JIP’s pledge to boost growth through regulatory reforms and improve public finances through reduced spending “will tone down Takaichi’s [policy] ambitions” Takahide Kiuchi, executive economist at Nomura Research Institute, said.

Political analysts say Ms Takaichi’s preference for expansive fiscal policy may also be opposed in discussions with her party’s key executives, such as LDP Vice President Taro Aso and Secretary General Shunichi Suzuki, who have both served as finance minister and believe fiscal discipline is vital.