Japanese government to approve US$140 billion stimulus

“QUIET EMERGENCY”

As the Bank of Japan is expected to continue raising interest rates, this mountain of debt will also cost more and more, said SMBC Nikko Securities economist Yoshimasa Maruyama.

Tax cuts “must be accompanied by a permanent source of revenue to fill this gap,” Maruyama wrote in a research note.

Ishiba, 67, has vowed to revitalize depressed rural regions and address the “silent emergency” of Japan’s declining population with measures to support families such as flexible work hours.

Going forward, businesses are concerned that the need to curry favor with opposition parties means Ishiba will avoid the reforms needed to make Japan more competitive.

There are also concerns that the government could put pressure on the Bank of Japan not to rush into raising interest rates, even if it leads to a weaker yen.

Government data on Friday showed headline inflation last month at a modest 2.3 percent, but it showed rice rose nearly 60 percent year on year, laying bare the pain of ordinary Japanese.

The price of staples has risen sharply due to hot weather and water shortages, and following a “megaquake” warning in August has led to stockpiling. A record influx of hungry tourists is also to blame.

In addition, Ishiba pledged to spend 10 trillion yen by 2030 to develop Japan’s semiconductor and artificial intelligence sectors and help the country regain its technological edge.

The new stimulus package could include government plans to buy a stake in next-generation chip maker Rapidus for 200 billion yen, according to media reports.

After dominating technology in the 1980s, “Japan sat back and watched a lot of innovation for quite a long time, especially when it came to artificial intelligence,” said Kelly Forbes of the Asia-Pacific Institute for Artificial Intelligence.

“What we’ve seen over the last two to three years is that Japan is really recognizing the potential” of such events, she told AFP.