japan faces a complex economic challenge, battling rising inflation and a massive national debt while navigating a period of political fragility. Addressing these issues will require decisive action, but the current political climate may hinder effective solutions.
For decades, Japan has grappled with deflation, a sustained decrease in the general price level. Tho, in recent months, inflation has emerged as a meaningful concern, driven by global energy prices and supply chain disruptions exacerbated by geopolitical events like the war in Ukraine. The Bank of Japan (BOJ) has maintained its ultra-loose monetary policy, diverging from the tightening cycles adopted by other major central banks like the U.S.Federal Reserve and the european Central Bank.
Together, japan holds the highest government debt-too-GDP ratio in the developed world, exceeding 260%. This massive debt burden limits the government's fiscal space and its ability to respond effectively to economic shocks. Servicing this debt consumes a considerable portion of the national budget, diverting resources from crucial areas like social welfare and infrastructure investment.