TechFlow news, November 27 — According to Jinshi Data citing Financial Times analysis, Japan's government debt has long remained at astronomical levels. However, over the past decade, government bond yields have mostly stayed low, creating a dangerous illusion—that massive debt is not a problem. The fiscal stimulus package recently unveiled by new Prime Minister Sanae Takagi, intended to differentiate her policies from those of her predecessor, has instead become the latest example of this dangerous misconception. The reality is: Japan’s enormous debt burden is real, while the low interest rates are an artificial illusion. The Bank of Japan has suppressed interest rates at target levels through large-scale bond purchases and its former Yield Curve Control policy, artificially preventing bond yields from reverting to market-determined levels. This mechanism functioned adequately before the outbreak of the COVID-19 pandemic, but the subsequent wave of inflation prompted central banks worldwide to raise interest rates collectively, shifting from quantitative easing via asset purchases to quantitative tightening. In fact, the pandemic has ended Japan’s experiment with interest rate suppression—ushering the world into a period of higher interest rate equilibrium. Persisting with rate suppression under these conditions could trigger a devastating currency depreciation cycle.
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