TOKYO, November 27, 2025 – Japan must take decisive steps to maintain market trust in its finances while implementing measures to boost economic growth, according to private-sector members of a key government panel. The recommendation comes as Japan faces economic contraction in the third quarter and elevated inflation of around 3%, driven primarily by rising food prices.

Key Recommendations from the Government Panel

The private-sector panel members emphasized that the government should implement targeted fiscal measures to support crisis management and strategic growth areas. However, they stressed that fiscal policy must remain sustainable to preserve market confidence.

Their proposal outlined several key priorities:

• Cut wasteful spending to improve fiscal efficiency
• Reduce Japan’s debt-to-GDP ratio gradually
• Monitor financial markets carefully, including interest rates, currency fluctuations, and stock market developments
• Ensure that new spending programs do not undermine long-term fiscal sustainability

Market Reactions and Fiscal Concerns

Recent movements in government bond prices and the Japanese yen reflect investor concerns that Prime Minister Sanae Takaichi’s expansive spending package could lead to higher debt issuance and prolonged inflation. The panel’s call for sustainable fiscal measures aims to address these concerns while supporting economic growth initiatives.

Panel Members and Their Influence

The joint statement was issued by four private-sector panel members, including former Bank of Japan Deputy Governor Masazumi Wakatabe and economist Toshihiro Nagahama, both known for their reflationist views supportive of government-led growth initiatives.

Their proposals are considered by the Council on Economic and Fiscal Policy (CEFP), which is responsible for guiding Japan’s fiscal blueprint and long-term economic strategy. The CEFP plays a crucial role in balancing growth-focused spending with measures to ensure long-term fiscal sustainability.

Economic Context in Japan

Japan’s economy faces a delicate balancing act: stimulating growth through targeted spending while controlling public debt, which remains among the highest in the developed world. Inflation, although moderate at around 3%, is driven by food prices and global supply chain pressures, making careful fiscal management essential.

Panel members argue that Japan must maintain market trust by signaling clear commitments to responsible fiscal management while continuing to invest in high-growth sectors and measures to mitigate crises.

Implications for Policy and Markets

If the government adopts the panel’s recommendations, it could strengthen investor confidence, stabilize the yen, and support sustainable economic growth. The proposals highlight the importance of integrating fiscal discipline with proactive economic measures in shaping Japan’s long-term economic strategy.