Japan May Be Seeing the End of QE

From Times Online:

The Japanese Government will rip up the promises it used to win last summer’s general election in an attempt to impose austerity and discipline on the most strained public finances in the developed world.

Pledges of generous child benefits, reduced motorway tolls and aid for farmers are likely to evaporate first, followed by the expected reversal of the promise not to raise consumption tax before 2013.

The dramatic policy U-turns were flagged yesterday by Yoshihiko Noda, the Finance Minister still less than a week into his new job and, like his predecessors, faced with defusing Japan’s explosive 200 per cent ratio of debt to gross domestic product. By the standards of Japanese finance ministers, he is already talking tough.

Describing Japan’s situation as “severe”, Mr Noda said that while he could not undo his party’s spending pledges in one go, he would start to do so “steadily”. Spending plans announced under the previous prime minister Yukio Hatoyama were savaged by economists as being impossible to achieve without eye-watering levels of new debt issuance.

Mr Noda’s comments came two days after Naoto Kan, Japan’s new Prime Minister, said that the country could face a Greek-style financial crisis if it did not act immediately to rein-in spending and start chipping away at the country’s spectacular mountain of public debt. Mr Kan, a known fiscal hawk, warned parliament that Japan’s long addiction to debt issuance had to end and told the country that he would try to deliver “minimum unhappiness” — a phrase seen as heralding an era of austerity and pain for many households.

http://business.timesonline.co.uk/tol/business/economics/article7149396.ece