Indonesia Is the Latest Country to Risk a Japanification Tag
With markets sniffing out fiscal vulnerabilities in many countries, this would be an inopportune time to lose discipline.
Prabowo Subianto has been skeptical of restraint.
Photographer: Rosa Panggabean/BloombergIndonesia is the latest country in danger of being tagged with the Japanification label. Not for a battle with deflation, or sluggish growth, and certainly not for tough demographics. The potential designation comes courtesy of the bond market.
Bank Indonesia’s intervention to stem a downdraft in the rupiah has, in the words of top officials, been “quite bold.” While the actions have alleviated the currency’s decline, the central bank’s holdings of government debt have swollen significantly and now account for about 25% of the total. It’s not inconceivable that the figure could rise to 30%, analysts and investors in Jakarta told Bloomberg News. The authority has become the biggest owner, surpassing local banks and foreigners.