Deutsche Bank: Japan's policy focus or shift from “care of Japanese yen” to “controlling return”

On 23 July, Deutsche Bank stated that if Japan wished to achieve an economic growth plan, the policy focus might need to shift from supporting the yen to controlling the rate of return on government bonds. The early announcement at the end of last month of a growth strategy of $2.3 trillion by Japanese Prime Minister Gao meant that Japan was “at the threshold of a major shift in fiscal and industrial policy”. In a report, Malika Sahdewa, a German strategist, wrote that Japan “needs to make room for increased spending while maintaining fiscal sustainability”. Japan ' s growth plan called for a substantial increase in spending, and his Government hoped to finance related expenditures by mobilizing domestic savings and encouraging large institutional investors to allocate more funds to domestic assets. At the same time, Japan needs to ensure that nominal economic growth is faster than financing costs. According to Sahdewa, both objectives may require measures to limit the increase in the rate of return. This would imply a shift in the policy direction of Japan。