Takaichi's 370 trillion yen plan leaves its public share open under a 40 trillion yen bond cap

Spread evenly over 14 years, the 370 trillion yen plan comes to about 26.4 trillion yen a year of public and private money combined ^[1]. If the state paid for all of it, that yearly average would equal about 66% of the 40 trillion yen ceiling Takaichi intends for new government bonds next year ^{[7] [2]}. Each tenth of the plan that falls on the public is roughly 2.6 trillion yen a year, or about 6.6% of the cap ^[3]. The spending need not be even and the public portion need not be borrowed, so everything above turns on the public-private split ^[3].

The revenue side moves the other way while the government makes record spending requests ^[16]. Oxford Economics analysts estimate that at least half of the annual revenue reduction from the food tax cut, roughly five trillion yen, will end up financed with debt ^[6]. Takaichi has not explained how the cut will be fully funded ^[5]. Those bonds would join a public debt of about $9 trillion, roughly twice the size of Japan's economy and the heaviest load of any advanced nation ^[8].

The Daily Upside argues that Japan's deficit, central bank policy and currency are playing an immediate role in the global selloff and in higher US borrowing costs ^[1]. Its evidence for the American link is co-movement, or rather a description of it: decades-high yields in Japan, the UK and Europe driving each other higher, with US bonds no exception ^[14]. Guy Miller, chief market strategist and economist at Zurich Insurance Group, told the Financial Times that rising yields are pulling one another higher ^[13]. Mutual pull makes Japan one source of pressure among several on a Treasury yield that rose nearly 90 basis points in the third quarter, the most in any quarter in over 25 years ^[17].

The same account names drivers that sit outside Japan's budget. Central banks including the BoJ have been pressed to raise rates because the US-Iran war has lifted energy costs, diesel especially, and the BoJ took its policy rate to 1.25% last month, a 31-year high ^[10]. Governor Kazuo Ueda said the bank's focus had moved to stabilizing inflation against pressure from the war, global AI spending and a weak yen ^[11]. Most policymakers believe more hikes should follow, according to a summary of the meeting ^[12]. Japan's 10-year yield of 3.1% sits about 1.85 points above the policy rate ^[4]. I'd expect part of that gap to reflect the hikes the board has signalled, and a speech about spending leaves those in place.

The Nikkei reported that Takaichi is expected to assure legislators her government is pursuing a "responsible, expansionary fiscal policy" ^[2]. If she puts a number on the public share and Japanese yields fall while Treasuries stay where they are, the Tokyo channel to US borrowing costs was smaller than The Daily Upside argues. If both markets rally together, the case for Japan as a driver gets stronger. I think the fiscal premium is real but secondary. Ueda's own list of inflation pressures runs to a war, AI spending and a weak yen ^[11], and the BoJ's answer to those is more hikes ^[12]. The counter-case is that a 14-year plan with an unstated public share, set beside a hard bond cap, is the kind of gap long-bond buyers charge for ^[3].