Japan says yes to more debt. Global markets will feel the effects.

Subscribe to enjoy similar stories. Prime Minister Sanae Takaichi’s landslide election in Japan Sunday will be consequential for global markets. Her Liberal Democratic Party secured an overwhelming mandate to carry out its agenda of tax cuts and fiscal stimulus, despite the government’s extraordinarily high public indebtedness.

That risks inviting a crisis in the Japanese government-bond and foreign-exchange markets, which would reverberate through the world financial system. That would come at an inconvenient time for the U.S. Under President Donald Trump, the U.S.

is on an increasingly precarious fiscal path. It has more than $38 trillion in public debt, making it particularly vulnerable to any fallout from Japan’s policies. A distinguishing characteristic of Trump’s approach to economic policy is recklessness.

Through his One Big Beautiful Bill Act, he has exacerbated the compromised budget situation that he inherited from his predecessor. According to the International Monetary Fund, the OBBBA will keep the U.S. budget deficit at over 6% of gross domestic product for years and will raise the public debt-to-GDP ratio to an Italian and Greek-like 140% by 2030.

There are genuine questions as to how Trump’s government will meet its enormous borrowing needs. Not only will it need to finance a budget deficit of the order of $2 trillion a year, but it will also need to roll over around $9 trillion a year in maturing debt. A key economic vulnerability of the U.S.

is that it is highly reliant on foreigners to finance its budget deficit. Indeed, foreigners own $8.5 trillion, or around 30%, of all outstanding Treasury bonds. This makes it all the more difficult to understand why Trump seems to be going out of his way to erode