Japan finance minister flags fiscal sustainability, debt reduction focus

Japan’s Finance Minister Katayama reiterated a focus on fiscal sustainability during the outline of priorities for the next fiscal year's budget. He emphasized the necessity of balancing policy support with long-term sustainability and market confidence, given Japan’s high debt-to-GDP ratio. The government seeks to reduce this ratio to boost market confidence, although specific consolidation targets remain uncommitted. His comments underscore the potential fiscal trade-offs involved as tax relief measures are being considered, with an increased estimate of revenue loss from tax adjustments. Furthermore, remarks made during a critical time of expected Bank of Japan rate hikes and rising bond yields suggest that a stronger focus on fiscal policies could help alleviate investor concerns regarding Japan's debt amid ongoing economic pressures. Katayama's stance points to the recognition of the growing importance of fiscal policy amid the transition away from ultra-loose monetary settings.