Japan Officials Warn of Rising Rate Risks

Japanese officials, including Prime Minister Shigeru Ishiba and Economic Revitalisation Minister Ryosei Akazawa, have warned that rising interest rates and government bond yields could increase Japan's debt-financing costs and negatively affect mortgage and corporate borrowing rates. With a high debt-to-GDP ratio, any rate increases may constrain government spending and require careful fiscal management to retain public trust. Both the ruling and opposition parties are addressing these concerns in the lead-up to the Upper House election, with the Liberal Democratic Party pledging to achieve a nominal GDP of ¥1 quadrillion by 2040 and raise average incomes by over 50%. Relief packages for households are also being promoted as part of these economic strategies. The Bank of Japan is expected to make only limited rate hikes in the near term, as markets remain cautious due to many citizens' unfamiliarity with rising rates after years of ultra-loose policy. Japan faces significant challenges in balancing economic growth and fiscal sustainability as interest rates trend higher.