Japanese policymakers are starting to see fiscal stimulus as the most likely next step to spark economic growth given the central bank’s dwindling monetary ammunition and uncertainty over the agenda of U.S. president-elect Donald Trump.
The market turbulence caused by Trump’s victory has unnerved policymakers, and offers an opportunity for lawmakers favoring bigger fiscal spending to press their case, with another supplementary budget for this year a possible first step.
And the Bank of Japan’s new monetary policy target of keeping the 10-year government bond yield near zero percent presents an opportunity to lock in long-term borrowing with virtually no interest cost to fund spending plans.
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