All isn’t well in the Japanese economy. The Japanese yen is sinking. Long-term interest rates are rising close to their highest levels in more than 20 years. The government is drowning in debt, and inflation is above the Bank of Japan’s 2% inflation target.
Yet Sanae Takaichi, Japan’s new prime minister, thinks now is a good time to unleash a large fiscal stimulus and ease monetary policy.
Takaichi is expected to finalize this week a fiscal stimulus package of roughly $110 billion, worth more than 2% of the country’s gross domestic product. Making matters worse, she is also suggesting that the Bank of Japan maintains an accommodative monetary policy.