LONDON: The yen should stay weak as the new Japanese government’s budget plans, piling more public debt on to Japan’s existing mountain of obligations, is unlikely, based on previous experience, to kickstart the economy.
Japan’s government will compile a 12 trillion yen ($ 136.30 billion) extra budget with up to 10 trillion yen set aside for economic stimulus, several sources said.
The government will sell more than 5 trillion yen in new bonds to fund the budget, the sources said.
Other funds will come from unspent money from last fiscal year’s budget and, notably, money originally allocated to servicing existing debt.
While such a proposal is readily understandable from a political perspective, given Prime Minister Shinzo Abe’s manifesto commitment to re-energising the economy, it is likely to be negative for the yen.
“For two decades, Japan has acted as if fiscal ‘stimulus’ must eventually work, running up the biggest peacetime debt in history at over twice the size of annual output,” said Derek Scissors, a research fellow at The Heritage Foundation, a Washington-based conservative think-tank, in December.
“The result? Japanese GDP in 2011 was no larger than in 1992. Mr. Abe wants to do more of the same, and he will receive more of the same in return.”
The harsh reality is that Japan’s rising general government debt to gross domestic product (GDP) ratio, which rating agency Fitch forecast would hit 235 percent at the end of 2012, is at least partly testimony to failed stimulus plans.
If debt-financed stimulus plans do not create economic activity whose effect is to enhance productivity and raise GDP at a rate that offsets and exceeds the rate of rise in debt obligations, then the debt-to-GDP ratio will increase.
Put simply, if US automaker pioneer Henry Ford had borrowed money to invest in more washrooms at his factory, the productivity gain would have been far less than investing in a new assembly line which revolutionized car production capacity.
Unless, Abe’s stimulus plans are revolutionary, which given the details so far released seems unlikely, the risk is that the extra budget just adds to Japan’s debt burden without lasting economic benefits.
That debt burden falls on an ageing population, which Bank of Japan Governor has said is partially to blame for Japan’s Slow economic growth rate.
Investors might reasonably conclude that piling more government debt on a greying population whose economic activity declines with age is hardly a recipe for a strong yen.
Of course a weaker yen is not a problem for the new government in Tokyo.
Abe’s government sees a weaker yen as part of the solution to Japan’s economic ills, providing exporters with a greater competitive advantage and encouraging imported inflation to help defeat stubborn deflationary pressures in the economy.
Japan is even poised to buy bonds issued by the euro zone’s permanent bailout fund, utilising Tokyo’s foreign reserves, a move intended to help foster financial stability in Europe but with the side effect of supporting the euro against the yen.
But that is an aside.
The core of the issue is that while piling debt on debt might be an obvious policy route for the Japanese government, its consequences only further bolster the case for a weaker yen.
— Neal Kimberley is an FX market analyst for Reuters.
The opinions expressed are his own.
Japan’s budget plans look set to keep yen weak
Japan’s budget plans look set to keep yen weak
Reforms target sustained growth in Saudi real estate sector, says Al-Hogail
RIYADH: The Real Estate Future Forum opened its doors for its first day at the Four Seasons Riyadh, with prominent global and local figures coming together to engage with one of the Kingdom’s most prospering sectors.
With new regulations, laws, and investments underway, 2026 is expected to be a year of momentous progress for the real estate sector in the Kingdom.
The forum opened with a video highlighting the sector’s progress in the Kingdom, during which an emphasis was placed on the forum’s ability to create global reach, representation, as well as agreements worth a cumulative $50 billion
With the Kingdom now opening up real estate ownership to foreigners, this year’s Real Estate Future Forum is placing a great deal of importance on this new milestone and its desired outcomes and impact on the market.
Aside from this year’s forum’s unique discussions surrounding those developments, it will also be the first of its kind to launch the Real Estate Excellence Award and announce its finalist during the three-day summit.
Minister of Municipalities and Housing and Chairman of the Real Estate General Authority Majed Al-Hogail took to stage to address the diverse audience on the real estate market’s achievements thus far and its milestones to come.
Of those important milestones, he underscored “real estate balance” as a key pillar of the sector’s decisions to implement regulatory tools “with the aim of constant growth which can maintain the vitality of this sector.” He pointed to examples of those regulatory measures, such as the White Land Tax.
On 2025’s progress, the minister highlighted the jump in Saudi family home ownership, which went from 47 percent in 2016 to 66 percent in 2025, keeping the Kingdom’s Vision 2030 goal of 70 percent by the end of the decade on track.
He said the opening of the real estate market to foreigners is an indicator of the sector’s maturity under the leadership of Crown Prince Mohammed bin Salman. He said his ministry plans to build over 300,000 housing units in Riyadh over the next three years.
Speaking to Arab News, Al-Hogail elaborated on these achievements, stating: “Today, demand, especially local demand, has grown significantly. The mortgage market has reached record levels, exceeding SR900 billion ($240 billion) in mortgage financing, we are now seeing SRC (Saudi Real Estate Refinance Co.) injecting both local and foreign liquidity on a large scale, reaching more than SR54 billion”
Al-Hogail described Makkah and Madinah as unique and special points in the Kingdom’s real estate market as he spoke of the sector’s attractiveness.
“Today, the Kingdom of Saudi Arabia has become, in international investment indices, one that takes a good share of the Middle East, and based on this, many real estate investment portfolios have begun to come in,” he said.
Al-Ahsa Gov. Prince Saud bin Talal bin Badr Al-Saud told Arab News the Kingdom’s ability to balance both heritage sites with real estate is one of its strengths.
He said: “Actually the real estate market supports the whole infrastructure … the whole ecosystem goes back together in the foundation of the real estate; if we have the right infrastructure we can leverage more on tourism plus we can leverage more on the quality of life … we’re looking at 2030, this is the vision … to have the right infrastructure the time for more investors to come in real estate, entertainment, plus tourism and culture.”
