This Seems To Be Important

The Japanese finance ministry seems set to unveil plans to cut new government bond issuance by more than 10 per cent - to below Y30,000bn ($258bn) - in the year to April 2007. The Financial Times has the story. They had better hope they are reading the situation aright, since if they aren't they are heading straight back into recession. This is what all the battle with the BOJ is about. 2007 is rapidly getting pencilled into my diary as an economic annus horribilis.

Mr Koizumi considers that the economic recovery, about to enter its fifth year, is robust enough to withstand a mild fiscal contraction, although he on Monday came out against a consumption tax increase for at least two years.

Sadakazu Tanigaki, the finance minister, said: “I think we can break down the barrier of Y30,000bn.”

Japan has been running a budget deficit of about 6 per cent of gross domestic product, including interest payments on public debt of about 150 per cent of GDP. Mr Tanigaki is keen to accelerate the process of regaining primary fiscal balance, before interest payments, by the first years of the next decade.

The finance ministry will make cuts by, among other things, trimming payments made to doctors and further bearing down on public works spending, which has fallen by a quarter since Mr Koizumi took office in 2001.

Ben Bernanke, The Speculation Starts

How quickly the world moves on these days. This is more than yet another trite observation, I am sure there is an underlying logic to all this. This time it's the issue of by-by Alan, hello Ben. Only last week I was bemoaning the fact that the Fed FOMC seemed to have forgotten about the transition in taking the rate rise decision, and now, this morning the FT is here to remind us just how complicated last weeks decision now makes the immediate future.

Bernanke's first year at the Fed could prove his toughest


When Ben Bernanke takes over from Alan Greenspan as chairman of the US Federal Reserve in just over a month he will barely have got his feet under the desk before he faces the central banker's most difficult decision: when to call the end of an interest rate cycle. The timing of the changeover could not be worse, say Fed-watchers......