Japan Downplays Fiscal Risks From $2.3T Plan, Citing AI And Semiconductor Support For Yen

Officials assert the massive industrial roadmap sustains fiscal stability and boosts yen demand via productivity gains, dismissing debt concerns while affirming BOJ independence.

Woofun AI reports that Japan's Minister for Economic Revitalization, Minoru Machii, stated the government's industrial investment plan will not undermine fiscal stability. He argued that boosting economic growth potential through strategic sectors will provide long-term support for the yen. The 14-year roadmap, unveiled in June, allocates 370 trillion yen across 17 priority sectors including artificial intelligence, semiconductors, and gaming.

Machii emphasized that supporting these industries is necessary to improve productivity and global competitiveness, which should increase demand for yen-denominated assets as funds flow into Japan. Addressing market concerns about fiscal burden, he noted that policy is not as aggressive as perceived and will focus on internationally recognized indicators like the debt-to-GDP ratio rather than annual budget balance.

Regarding a proposed two-year consumption tax reduction costing approximately 5 trillion yen annually, Machii claimed the government can raise these funds through fiscal restructuring and cost-saving measures, stating that 'raising 5 trillion yen is not difficult.' On monetary policy, Machii expressed respect for the Bank of Japan's independence, countering previous market fears that fiscal plans might compromise central bank autonomy.

Market expectations for further BOJ rate hikes in September or October are currently growing.