Japan interest rates hit 30-year high

Bank of Japan moves to slow inflation as prime minister borrows more to fund fiscal package

- RIVER AKIRA DAVIS

Mount Fuji, Japan's highest mountain, is seen behind buildings in central Tokyo on Monday.

(PHOTO: AFP)

Speaking this month at an international finance conference in Tokyo, Prime Minister Sanae Takaichi of Japan used an unusual turn of phrase to sell the assembled crowd on her plan to revive the economy.

"Just shut your mouths and invest everything in me," Ms Takaichi declared, quoting a line from the popular manga series Attack on Titan - a reference that several in the room admitted was lost on them. "Japan is back. Invest in Japan," she continued.

Ms Takaichi's promise to the group was that she would bolster Japan's economy through government spending, but only in a way that was "sustainable" and "responsible." The spending would be enough to drum up growth but keep Japan's already enormous debt levels manageable, she said.

The prime minister's ability to balance these dual pledges is about to be put to the test.

Yesterday, the Bank of Japan increased its benchmark interest rate to 0.75%. While this remains far below rates in other major economies, it is the highest level in Japan - which for decades has used near-zero rates to battle deflation - since 1995. More rate increases are expected in the coming years.