00:00Before we were coming on there, you were already telling me about how much misunderstanding there is in the markets.
00:06The fact that Finance Minister Katayama made it very clear to me that her message to investors was that Prime
00:11Minister Takahichi is not a reflationist.
00:14And yet, I have to say, we still have fiscal spending. The BOJ is not hiking as fast as markets
00:21think it should.
00:23Wouldn't that classify as reflationist?
00:25Synanomics is not reflationist. Reflationistist policies are simply to expand aggregate demand by fiscal stimulus and monetary easing.
00:39But the synanomics is investment policies to expand aggregate supply. That is totally different.
00:47So, synanomics has a proactive fiscal policy, but mainly for investment expansion to expand aggregate supply.
00:58So, reflation policy is just demand. So, synanomics is to expand supply. That is totally different.
01:04The problem with that idea is that, okay, so you're expanding investments that will pay off much later.
01:10And then, at the same time, because of it, you have, for example, JGB's yield rising to multi-decade highs.
01:17At what point does the cost of capital offset the fact that you have growth?
01:24Because businesses will have a hard time, households as well.
01:27Yeah, Japan is now growing.
01:30Japan's nominal GDP growth was always 0% level for 20 years.
01:35But now, nominal GDP growth level is 3% level.
01:39It's normal, 1% real growth and 2% inflation.
01:44That would be the target of synanomics, raising real GDP by investment.
01:51Then, of course, Japan's long-term yield is now 3%.
01:54It's par with nominal GDP growth rate.
01:57That is a normalization of Japan's yield curve after the normalization of monetary policy.
02:04I think the concern a lot of the times is all of these investments, especially the 370 trillion yen one,
02:11which is public-private, right?
02:12There's no visibility right now of what will actually be the public-private ratio.
02:21Is the government taking on too much?
02:23Yeah, target is the amount of investment, not only from the corporations, but also from the government.
02:30So, total investment amount is important.
02:33So, we will increase government investment to stimulate private investment so that the total of aggregate investment should be around
02:46370 trillion yen by fiscal year 2040.
02:50And we have already planned Japan growth strategies.
02:54And we have 17 strategic areas to invest, including AI, semiconductors, and defense industry, and so on.
03:03And within 17 strategic areas, we have 62 important technologies and products to invest.
03:11So, we have a plan.
03:12And by the end of this year, we will make this plan more accurately to forecast what kind of investment
03:21will come and what kind of result we expect and so on.
03:25Are we going to get a more detailed breakdown of what public funds and what private funds, how much of
03:32it will the 370 trillion yen consist of?
03:36A lot of it, because there are no details on what sort of accountability there will be in these projects,
03:42seems to be wishful thinking.
03:44We'll invest this much, and you haven't even told us how much this much is.
03:47And then we'll get these results.
03:49And the fact that those results are not necessarily guaranteed.
03:52We call it portfolio of investment, like financial investment.
03:58So, we'll review every year under Japan Growth Strategy Council whether this plan is going well or not.
04:06And if some products are not doing well, we'll switch it.
04:11You'll have a guideline of specifically what a multiplier of the investments will actually need to be for those projects
04:18to be sustainable.
04:19So, by the end of this year, we'll have more detailed plans for this investment along with fiscal year 2027
04:29governmental budget.
04:30Is there the concerns around the defense budget as well?
04:38Because we still don't have any clarity on how large it could be.
04:42Will it be problematic for the markets to sort of have confidence in it?
04:48I think this is just a long-term goal within 10 years, 15 years.
04:53And this investment plan is also by 2040.
04:58So, 15 years plan.
04:59So, I think the defense plan should be around 10 to 15 years, push up Japan's defense spending from 2
05:08% GDP.
05:10So, this is not the amount the market offers anxieties for a single year.
05:19The fact that a lot of these commitments are very long-term, Japanese politics, especially when it comes to prime
05:26ministers,
05:26has had a reputation of having a revolving door for some periods of time.
05:31Would that make a difference in how these plans are carried out?
05:35I think, you know, Japanese people are supporting the Takai-chi government.
05:40Now, the supporting ratio is over 50%.
05:43It is much higher than the previous government.
05:46Why?
05:47Because Takai-san is saying, we can grow.
05:51So, up until the former government said, oh, we cannot grow.
05:55We have to save.
05:56Then, of course, you know, Japanese people cannot support.
05:59Now, Takai-san is saying, we can grow by investment.
06:03Now, Takai-san is saying, we can grow by investment.
Comments