The Japanese government lacks effective measures to tackle the country's economic problems, including high public debt, stagnant wages and rising living costs, said a Japanese economist on Friday.
Voting for Japan's lower house election began on Sunday morning, with economic policy remaining a key point of contention among political parties.
Hidetoshi Tashiro, chief economist at Japan's Infinity LLC., noted that the depreciation of the yen is the main driver of rising living costs in the country. He emphasized that raising interest rates could help curb this depreciation and reduce prices. However, the Japanese government will find it difficult to manage the consequences of higher interest rates. "Currently, the yen's exchange rate has returned to levels last seen around 1970. In Japan, the 10-year interest rate is about one percent, and about 560,000 (small and micro) enterprises find this rate unaffordable. The Japanese government also opposes (raising interest rates) because the government debt has reached 1,311 trillion yen (about 8.6 trillion U.S. dollars) (as of the end of June this year). This means that a one-percent increase in interest rates would result in an additional 13 trillion yen in interest payments. As a result, interest rates cannot be raised, making it hard to address the yen's long decline, and rising prices in Japan are unlikely to be resolved fundamentally," said Tashiro.
In the long run, Japan should strengthen economic ties with countries that have higher growth rates to create more opportunities for its own economy, according to Tashiro.
"Speaking of Japan's medium-term to long-term economic outlook, if the current situation remains unchanged, it looks bleak. The only way to improve this is to strengthen economic relations with countries and regions that have higher growth rates than Japan, like the Global South or BRICS nations. If Japan can improve ties with these countries, especially China, its economic outlook could be much brighter," said the economist.