Japan Disappearance of Net Domestic Fund Demand

Crédit Agricole argues that Japan's focus on fiscal consolidation is 'reckless austerity' given the disappearance of net domestic fund demand. It advocates for investment-led growth and the abolition of the 60-year bond redemption rule to support a strong economy.

Key Takeaways

• 1.Japan is suffering from 'reckless fiscal austerity' where the government prioritizes fiscal consolidation despite a disappearance of net domestic fund demand and an excess of funds.
• 2.The 'crocodile's mouth' chart, often used to justify fiscal crisis, is misleading as it includes unnecessary debt-redemption costs that are not standard in other advanced economies.
• 3.Premature BoJ interest rate hikes intended to curb JPY depreciation could trigger deflation and harm SMEs if private-sector demand has not recovered.

Table of Contents

• Japan: disappearance of net domestic fund demand is reckless fiscal austerity
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