What Happened in the UK Doesn’t Stay in the UK. Japan Could Be Next
Commercial and residential buildings in Tokyo’s Minato district. Tankan business confidence and Tokyo CPI data earlier this month showed the strength of price gains in September is becoming a growing concern for businesses.
Photographer: Akio Kon/BloombergThe anarchy in the UK was less about bond markets forcing the government to rescind policy and more about a fiscal policy that was not aligned with tightening monetary policy as a cost of living crisis bore down on households and businesses. Japan is the only economy that has yet to experience the torrid inflation seen elsewhere, allowing its central bank to stick with easy policies. That may soon change.
Notch one up for the bond vigilantes. That’s what you hear these days now that the UK government has been forced into a humiliating U-Turn on the tax-cutting promises of its embattled Prime Minister Liz Truss. Alas, the lesson for other countries is not — as conventional wisdom would have you believe — that the bond market vigilantes are ascendant. It is that loose fiscal and monetary policies are unsustainable during a cost of living crisis.