Takaichi Promotes 370 Trillion Yen of Investment

Sanae Takaichi government released a plan of investment by public and private sectors through fiscal year 2040. The government assumed total amount of investment in this period to be 370 trillion yen. Although it expects that active public investment will invigorate economic activities of private sectors, there still remains a concern that further spendings may exacerbate fiscal balance of the government. 

Prime Minister Takaichi launched Headquarters of Japan Growth Strategy in her government last November. It was aimed at promoting public and private investments to contribute to global issues by providing with goods, services and infrastructure. Takaichi believes that active investment of the government strengthens Japanese economy by inducing action of private sectors.

 

The headquarters designated seventeen categories of economy for intensive investment, which included artificial intelligence (AI) and semiconductor, medical treatment and medicines and web contents such as game software. The released plan indicated the amount of investment for each of those seventeen categories. Takaichi named strategic investment for them “crisis control investment,” in which meaning of “crisis” is still unclear.

 

The government is going to secure 10 trillion yen of additional public spendings every year to implement 370 trillion yen of public and private investment by 2040. To guarantee governmental engagement, it will secure fiscal resource beyond framework of fiscal year. Although the government has been appropriating budget for projects which are concluding every single year, Takaichi argues that the system should be reformed to make private sectors confident with government’s involvement.

 

The investment plan expects 101 trillion yen of investment in AI and chips, 64 trillion yen for development of medicines, 55 trillion yen for data centers to support cyber security, 33 trillion yen for game contents, or 28 trillion yen for energy security. The government selected sixty-two goods or technologies, which Japan has advantage in the world, to promote active investment within seventeen strategic fields.

 

However, the headquarters did not indicate how it would secure fiscal resources to implement the plan. If Takaichi depends on issuing new governmental bonds to accelerate public investment for specific businesses, it is likely that confidence on Japan’s fiscal discipline will decline. Japanese governmental bonds were intensively sold and their interest rate significantly hiked in January when Takaichi announced two-year moratorium of consumption tax for foods. Skepticism on Takaichi’s handlings of economic polies still exists in the market.

 

Main career of Takaichi as cabinet minister is minister in charge of economic security in Fumio Kishida Cabinet. She has not experienced Minister of Finance or Minister for Foreign Affairs. Accordingly, Takaichi tends to focus more on economic growth, backed by bureaucratic staffs from Ministry of Economy, Trade and Industry, than on fiscal discipline of which Ministry of Finance is in charge.

 

Balancing investment for further economic growth, to raise Japan at an honorable position in the world, with fiscal discipline for managing a great amount of debt to future generations is unescapable issue for Takaichi government.

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