Reflections on Constitutionalism on August 15

 On August 15, the 81st anniversary of the end of World War II, a spokesperson for the Chinese Foreign Ministry issued a statement of fierce protest and condemnation regarding Prime Minister Sanae Takaichi's ritual offering (玉串料 tamagushi-ryo) and her cabinet members' visits to Yasukuni Shrine, labeling it a “challenge to the post-war international order.”

the sunflower that’s taller than me

In considering this issue, I would first like to look back at its historical background. When Japan and China normalized diplomatic relations in 1972, China waived its demand for massive war reparations. This decision was grounded in the logic of separating the military from civilians, the idea that a handful of militarists who planned and led the war were the culprits, while the general Japanese public were victims. However, Class-A war criminals were secretly enshrined at Yasukuni in 1978—a fact that became widely known to the public through news reports in 1979. Consequently, Emperor Showa ceased his visits to the shrine. The situation escalated further in 1985 when Prime Minister Yasuhiro Nakasone made an official visit, prompting explicit condemnation from China for the very first time.

Next, we need to understand the real nature of this problem. It is not a matter of diplomatic consideration for neighboring countries, but rather Japan’s legal constraints, such as the principle of separation of church and state. This is because, in order to ensure that constitutionalism functions properly and to maintain long-term social stability, those in power must also strictly adhere to these principles. 

Wise politicians will be cautious about fettering the governments with restrictions that cannot be observed, because they know that every breach of the fundamental laws, though dictated by necessity, impairs that sacred reverence which ought to be maintained in the breast of rulers towards the constitution of a country, and forms a precedent for other breaches where the same plea of necessity does not exist at all, or is less urgent and palpable.

(Quoted from “Federalist No. 25”)

Put another way, there is a good chance that public leaders' formal visits to Yasukuni Shrine are against the Japanese Constitution. Since the Religious Corporations Law was passed in 1951, Yasukuni Shrine has been formally recognized as a "religious corporation." Additionally, the Constitution's Article 20, Paragraph 3 clearly requires a rigorous separation of church and state,

Article 20. Freedom of religion is guaranteed to all. No religious organization shall receive any privileges from the State, nor exercise any political authority.

2. No person shall be compelled to take part in any religious act, celebration, rite or practice.

3. The State and its organs shall refrain from religious education or any other religious activity.

In contrast, pre-war Imperial Japan relied on the sophistry known as the "Shrine Non-Religion Theory." The Meiji government positioned Shinto as the pillar of state governance, effectively On the other hand, pre-war Imperial Japan depended on a sophisticated theory called the "Shrine Non-Religion Theory(神社非宗教論)." State Shinto was essentially established by the Meiji government, which made Shinto the cornerstone of state rule. They said that “Shinto is not a religion, but a public teaching of the state (治教) based on reverence for the Emperor." They established shrines as public institutions by prohibiting Shinto priests from participating in obviously religious activities. As a result, the government was able to actively promote State Shinto while pretending that they were "not violating the separation of religion and state." Such perverted reasoning is obviously untenable in the present day.

Now, the principle of the separation of religion and state does not, in itself, directly guarantee individual rights. The prevailing constitutional interpretation is that while the first half of Article 20, Paragraph 1 directly guarantees the fundamental human right to "freedom of religion," the latter half of Paragraph 1, as well as Paragraph 3, serve as an "institutional guarantee." By legally securing the institutional separation of state and religion, they indirectly ensure freedom of religion.

The vulnerability of protecting rights indirectly through an institutional guarantee lies in the fact that the impending crisis remains largely invisible until an individual's rights are directly violated. A politician's visit to Yasukuni will not immediately take away our freedom of religion any time soon. But ignoring the deterioration of the institutional barrier between the state and religion may eventually allow the state to meddle in our deepest personal beliefs. As the sovereign people, we must hold our leaders responsible for ensuring that the Constitution is strictly adhered to and that no departure is allowed in order to safely safeguard the universal value of fundamental human rights.

The Cult of Overwork

 Prime Minister Takaichi’s recent social media posts flaunting her "zero to three hours of sleep" and busy domestic chores have drawn cold stares both domestically and internationally. The UK's Independent cynically reported, "Japan PM’s latest attempt to emulate Margaret Thatcher triggers cross-party backlash." Thatcher, whom Takaichi idolizes, was famously known for sleeping only four hours a night. Biographies note that even during her premiership, she cooked for Downing Street staff, prepared her husband's breakfast, and did the ironing. It has been pointed out that Takaichi's sudden tweet was a calculated performance with exactly this in mind.

Looking back to October 2025, during her inaugural speech as LDP president, Takaichi declared: "I will have everyone work like draft horses. I myself am throwing away the term 'work-life balance.' I will work, work, work, work, and work." This statement created a huge media wave, even won the grand prize for the 2025 Buzzword of the Year, but it didn’t end as mere rhetoric. This slogan turned the direction of the nation’s labor policy 180 degrees.” The Ministry of Health, Labor and Welfare had originally planned to revise the Labor Standards Act at the 2026 regular Diet session to address long working hours. This includes a ban on 14 or more consecutive days of work and a “working interval system” that requires at least 11 hours of rest between shifts. However, after her appointment, the submission of these bills was shelved and effectively put on ice.

While demanding that the public discard work-life balance and work like draft horses, what about the Prime Minister's own work ethic? Her attendance at the budget committees of both houses during the extraordinary Diet session was strikingly low. While the average attendance time for prime ministers in intensive deliberations over the past five years was 68 hours, Takaichi clocked in at a mere 33 hours, exactly half. Fleeing from the Diet, the most crucial arena for democratic accountability, only to brag about "not sleeping" due to household chores and reading documents at home, is nothing short of farcical.

I am not criticizing the Prime Minister by demanding she "work more." Quite the opposite. I am adamantly against this outdated "guts over brains" mentality that requires everyone to throw their work-life balance out the window and work like a beast of burden. Japan has a long-standing, toxic habit of valuing the sheer amount of hardship endured in a process over objective results. Often the suffering itself is the goal and is romanticized.

Masao Maruyama (丸山眞男), the leading political scientist and intellectual historian, in his analysis of the philosophy of Yukichi Fukuzawa (福沢諭吉), referred to wakudeki (惑obsession/溺fixation) as a state in which certain customs or patterns of behavior become divorced from human agency, fixate themselves, and dominate the people. This is due to a mistrust of logical rational systems and a dependence on subjective spiritualism such as “raw feelings” or “pain”. When this wakudeki takes deep root in society, objective accountability for results vanishes, allowing irrational spiritualism and the absurdities of the status quo to persist. This forms what Maruyama called the "system of irresponsibility (無責任の体系)*1." Emotional appeals like, "Look how much I'm suffering without sleep," are nothing more than self-indulgent get-out-of-jail-free cards designed to deflect responsibility for policy failures.

*1: A concept proposed by Masao Maruyama. It refers to a structural flaw in the decision-making of organizations or nations where the true locus of responsibility and decision-making authority becomes ambiguous, allowing things to proceed without anyone taking accountability. 

Under this "system of irresponsibility," the real-world hardships of the people are brushed aside. Right now, what voters expect most from the Prime Minister are measures to combat inflation. Yet, what she enthusiastically pushed through this Diet session was the creation of a new penal code establishing imprisonment for damaging the Japanese flag, along with a profoundly misogynistic revision to the Imperial House Law--granting succession rights to a male heir 38 degrees of consanguinity away via adoption, blatantly ignoring the Emperor's own first-degree daughter. Meanwhile, the yen, which stood at 140 to the dollar when she took office, has plummeted to 163. Naturally, in a country that relies on imports for everything from food to energy, prices have skyrocketed. Furthermore, Japan's GDP per capita by purchasing power parity, which ranked 6th globally in the 1990s, 39th in 2025, and is projected to plunge to 43rd in 2026.

Prime Minister Takaichi and her fanatical supporters might genuinely believe that if we just sacrifice our sleep and work recklessly, the nation will become rich again. However, the biggest reason Japan climbed to become the world's second-largest economy was not because of "モーレツ社員(corporate warriors)*2," nor because people chugged Regain energy drinks to "24時間戦えますか(fight for 24 hours)*3." It was a geopolitical bonus, during the Cold War, the United States heavily favored Japan as a staunch bulwark against communism. The foundational global context is entirely different now. Imitating only the superficial aspects of that era's success story–namely, the sweat and suffering–and forcing the Japanese people to work like draft horses will yield zero reproducible economic growth. The only thing with any reproducibility is the triggering of karoshi(過労死)*4, a tragic phenomenon from the late 1980s that notoriously made its way into the English dictionary.

*2: Moretsu shain: A term for the fiercely dedicated corporate salarymen symbolizing Japan's period of rapid economic growth, who prioritized company work over their families and private lives, willingly enduring long hours and self-sacrifice. 

*3: A social phenomenon sparked by a 1988 TV commercial for an energy drink with the catchy slogan "Yellow and black are the signs of courage, can you fight for 24 hours?♪" 

*4: Karoshi is a Japanese word meaning death from overwork.

It is a rock-solid, medically proven fact, backed by countless experiments and large-scale studies, that sleep deprivation leads to impaired concentration, a weakened immune system, and an increased risk of lifestyle-related diseases. If so, what the Prime Minister of a nation should be recommending to her people is not some insomniac spiritualism, but rather "logical, efficient systems" and "getting plenty of rest."

Patriotism Without Legislative Facts

 I voiced my concerns about the "Japanese Flag Damage Crime" bill on this blog last year, and it has finally passed the House of Representatives Cabinet Committee.

"Anyone who publicly damages, removes, or defiles the flag in a manner that causes significant discomfort or disgust to others shall be punished by imprisonment for up to two years or a fine of up to 200,000 yen."

「人に著しく不快、嫌悪の情を催させる方法で公然と損壊、除去、汚損した者は2年以下の拘禁刑または20万円以下の罰金に処する」

When I saw the news, I practically got a headache, despairing at the intellectual decline of Japan as a nation supposedly governed by the rule of law. To begin with, this bill completely lacks both the "legislative facts" and the "protected legal interests" that are fundamental prerequisites for enacting criminal law. If someone destroys a flag belonging to someone else, they can already be adequately punished under existing property damage laws.

In other words, what this new law specifically targets is the act of publicly tearing up your own Japanese flag. How you handle your own property infringes on exactly zero people's rights, and there is no real-world crisis where society is suffering because current laws can't address this. To invent a new criminal penalty under these circumstances just to stroke "patriotic" egos is nothing short of sheer lunacy.

What’s even more terrifying is the sheer fragility of its constituent elements. It seeks to punish those who act "in a manner that causes significant discomfort or disgust to others." But how exactly does one objectively prove abstract, internal emotions like "discomfort" or "disgust" to establish a crime? If you ask me, xenophobes violently waving the national flag while spewing hate speech is the very definition of a highly uncomfortable and disgusting "defilement of the flag." Yet, let's be real, this law, championed by authoritarian politicians, will never be applied to their own base. The inevitable outcome is glaringly obvious, it will be weaponized through arbitrary judgments by those in power to exclusively target anti-government critics and freedom of expression.

Proponents loudly claim that "other countries have flag desecration laws too," but no modern developed nation is pushing for this kind of archaic legislation today. In the US, the Supreme Court has already ruled (in Texas v. Johnson) that burning the flag is protected under the First Amendment as freedom of speech, rendering such bans unconstitutional.

There is also an argument claiming that it’s a "structural imbalance" in our legal system to have Article 92 of the Penal Code (Damage to Foreign National Emblems) without a corresponding law for the Japanese flag. However, Article 92 was specifically designed as a crime concerning diplomatic relations. Its protected legal interest is to prevent diplomatic friction or international conflicts that could threaten Japan's security and the interests of its citizens. That’s precisely why it is a crime subject to prosecution only upon complaint by a foreign government.

The Penal Code of 1907, including Article 92, was heavily influenced by the Otsu Incident of 1891. That led to the historic incident at Otsu, when a Japanese policeman named Tsuda tried to assassinate the Russian Crown Prince during his visit. The Meiji government feared a Russian retaliation, and pressured the judiciary to sentence Tsuda to death under the crime of high treason, a charge strictly reserved for acts against the Japanese Imperial Family. The Chief Justice famously declined, arguing that high treason could not apply to a foreign royal, maintaining separation of powers and judicial independence. "we need a Japanese flag law just to balance things out" is total nonsense when you take into account the specific historical context in which the law protecting foreign emblems was born.

Furthermore, those who hold historical grievances against Japan and target flags in protest typically go after the Rising Sun Flag (旭日旗), not the legally designated Hinomaru (日章旗). However, applying this new law to the Rising Sun Flag, which isn't specified in the criminal code, would be a clear violation of the principle of legality (specifically, the prohibition of analogical interpretation). Ultimately, this law risks being unconstitutional by infringing on the "freedom of expression" guaranteed by Article 21, all while offering practically zero real-world utility.

At the end of the day, this bill is a toothless, purely performative piece of legislation designed to flaunt a twisted ideology that elevates the "authority of the state" and the "national polity" above individual rights. The spirit of Article 13 of the Constitution, which champions constitutionalism and respect for individuals, is being trampled on, leaving only a rampant, excessive identification with state power. I suppose a bill like this passes because an increasing number of people have surrendered their own independence, suffering from the illusion that they become strong by merging their own identity with the will of the state. It’s truly a shame.

By the way, we currently have two typhoons approaching simultaneously. Here in my area, the rain is heavy but the wind is relatively mild. However, it looks like Tokyo is going to take a direct hit. Please stay safe, everyone.

Sacrifice Should Not Be Romanticized

 Prime Minister Takaichi, attending the Okinawa Memorial Service for War Victims, delivered the following speech,

「今日私たちが享受している平和と繁栄は、この地で命を落とされた方々の尊い犠牲と、沖縄の歩んだ筆舌に尽くし難い苦難の歴史の上に築かれたものです。そのことを改めて深く胸に刻みながら、静かに頭を垂れたいと思います」 

"The peace and prosperity we enjoy today are built upon the noble sacrifices of those who lost their lives on this land, and the indescribable history of hardship that Okinawa has endured. Engraving this deeply in my heart once more, I wish to quietly bow my head."

 I simply cannot stomach the phrase "noble sacrifice."

Modifying the word "sacrifice" with "noble" attaches a nuance of voluntary devotion, a willing surrender of one's life for a sublime cause. The reality of the Battle of Okinawa was that it was merely a stalling tactic to buy time for the defense of the mainland. To slap the label of "noble sacrifice" on deaths forced upon people stripped of any avenue of escape by the military and the state—on gruesome deaths they were simply dragged into—is nothing short of a desecration to those who died in profound despair.

Human sacrifice should never be romanticized. And this glorification of sacrifice is by no means confined to the realms of politics or history.

There are many anime series I love, but there are also those I simply cannot accept, specifically, the tropes common in shōnen manga, "With enough willpower, you can overcome anything," or "Sacrificing oneself for the sake of one's comrades." While many extol these narratives as "touching" or "passionate friendship," to me, they look like nothing more than totalitarian propaganda.

The ethos that "strong willpower can overcome any hardship" easily flips into a cruel, illogical fallacy: "If you couldn't overcome it, it's because you were weak-willed." It reeks of wartime Japan, where citizens practiced thrusting bamboo spears to shoot down B-29 bombers, somehow believing that sheer spirit would somehow get the job done.

The glorification of "self-sacrifice, the casting aside of one's own life and happiness for a cause or for one's companions" is nothing less than a barbaric set of values that stands in direct opposition to the spirit of Article 13 of the Japanese Constitution, which guarantees supreme respect for the individual. Is there any entertainment more unsettling than consuming the sacrifice of others as an inspiring story?

What is truly noble is ensuring no one has to be sacrificed in the first place. The belief that sacrifice itself is noble is profoundly dangerous.

Robbing Peter to Pay Paul

 It made front-page news, the government is apparently leaning toward slashing the consumption tax on food and beverages to a mere 1% as a countermeasure against inflation. The official excuse? Doing so will shorten the time needed to update retail cash registers, allowing for a speedier rollout.

Food & Beverage Tax Cut: 1% Plan the Leading Contender

At first glance, it sounds like a godsend—a policy that eases the daily burden of grocery bills. But when you hold this up against the harsh light of our current macroeconomic reality, this isn't an inflation remedy. It's a highly volatile concoction that threatens to accelerate the very inflation it claims to fight.

Now, the consumption tax applies the same rate regardless of income, meaning it takes a disproportionately larger bite out of lower-income households. Because it's inherently regressive, I’m not opposed to the idea of a tax cut in principle. What I am deeply allergic to is framing this as an "anti-inflation measure."

Prices are inextricably tied to the credibility—and therefore the value—of the Japanese Yen. Claiming that simply slashing taxes will lower prices is nothing more than political sleight of hand. It brings to mind the old idiom 朝三暮四 Chosan-boshi (see footnote), a pure illusion of benefit.

If the government forces through a multi-trillion-yen tax cut without securing a revenue source, what happens to Japan's macroeconomy? It doesn't take a psychic to predict the following vicious cycle:

• Fiscal deterioration triggered by unfunded tax cuts

• A spike in Japan's sovereign risk, sparking a massive sell-off of government bonds (JGBs)

• A collapse in the credibility of the Yen itself, plunging the currency even lower

• Skyrocketing import prices driven by the weakened Yen

Japan's 10-year government bond yields have already breached the 2.7% mark. Around this time last year, they were hovering near 1.5%. The market is casting a ruthless eye on Japan's fiscal discipline. If we issue more bonds—meaning, if we pile on more national debt—to fund this tax cut, trust in Japan's finances will crumble further. It is as clear as day that this will invite an even weaker yen.

Herein lies the fatal flaw: the Japanese way of life is intensely reliant on imports. We aren't just talking about raw ingredients like meat, fish, wheat, and soybeans. The livestock feed for domestic farming, the gasoline to transport our goods, the electricity to power our infrastructure, every single facet is fully exposed to the crosshairs of a weak yen.

The true value of the Japanese Yen (its Real Effective Exchange Rate) has plummeted to a third of its peak.

Real Effective Exchange Rate graph

If unfunded tax cuts drag the yen down even further, the resulting import inflation will cause supermarket prices to skyrocket. That little 7% tax break at the register? It will be obliterated in the blink of an eye. Worse still, overall inflation across all daily necessities means our total household expenses will actually increase.

The government’s official reasoning—that "we're prioritizing early implementation by going with 1% because updating cash registers takes too long"—is absurd on its face. Risking the very foundation of the nation and devaluing our currency for a stopgap, crowd-pleasing stunt is populism at its absolute worst. What we desperately need right now isn't a sweet-sounding handout; it is the fiscal discipline required to restore the world's faith in the Yen.

(Note on 朝三暮四 Chosan-boshi:

This idiom refers to being fooled by superficial differences when the end result is exactly the same. It stems from the classic Chinese text Zhuangzi.

A monkey trainer told his macaques,

"I will give you three acorns in the morning and four in the evening."

The monkeys were furious. So, the trainer rephrased,

"Okay, how about four in the morning and three in the evening?"

The monkeys were delighted.

I always find it fascinating how many Japanese four-character idioms are rooted in ancient Chinese fables!)

Who Decides When Japan Votes?

On January 23, 2026, the very day the regular Diet session is being convened, Prime Minister Takaichi is dissolving Japan's House of Representatives.

「国民の皆様、私は、本日、内閣総理大臣として、１月２３日に、衆議院を解散する決断をいたしました。なぜ、今なのか。高市早苗が、内閣総理大臣で良いのかどうか、今、主権者たる国民の皆様に決めていただく、それしかない。そのように考えたからでございます」

"My fellow citizens, as Prime Minister, I have decided today to dissolve the House of Representatives on January 23rd. Why now? The only way forward is to let you, the sovereign people, decide here and now whether Sanae Takaichi should serve as Prime Minister. That is the conclusion I have reached.”

However, this rationale for dissolution raises institutional concerns. Japan operates under a parliamentary cabinet system, where the Prime Minister is not directly elected by the people. Article 66 of the Constitution stipulates that the Cabinet bears collective responsibility to the Diet for the exercise of executive power, meaning the source of the Prime Minister's legitimacy lies not in "direct popular mandate" but squarely with the Diet. It is not the voters but Diet members who ultimately decide who should serve as Prime Minister, and that judgment has already been expressed through the prime ministerial nomination process. Nevertheless, framing the dissolution as “asking the people whether Sanae Takaichi should be Prime Minister” skips over a fundamental premise of parliamentary democracy. It portrays a House of Representatives election as though it were a personal vote of confidence in the Prime Minister. In this regard, questions remain about where exactly the institutional justification for this dissolution lies.

At the press conference, she also announced the election timetable, the official campaign would begin on January 27, with voting scheduled for February 8. In Japan, members of the House of Representatives nominally serve four-year terms, but those terms are cut short whenever the chamber is dissolved (Article 45 of the Constitution). Once dissolution occurs, Article 54 sets a rapid constitutional clock in motion, a general election must be held within 40 days of dissolution, and the Diet must be convened within 30 days after the election.

In other words, dissolution is not a mere political event. It is an institutional switch of enormous weight, one that forces voters, under intense time pressure, to decide what exactly they are being asked to endorse.

Yet Japan’s practice of dissolving the lower house has long been noted as unusual among democratic systems. The central issue is how easily the prime minister can control the timing of dissolution, turning election dates into instruments of political strategy. Japan’s Constitution lists “the dissolution of the House of Representatives” in Article 7 as one of the Emperor’s ceremonial acts of state, while Article 69 explicitly provides that, if a no-confidence motion is passed, the cabinet must either resign or dissolve the House within ten days.

A dissolution under Article 69 is relatively clear, it has defined conditions and constraints.
A dissolution under Article 7, by contrast, specifies no conditions at all.

Despite this, postwar Japan has accumulated a political practice in which the Emperor formally dissolves the House based on the “advice and approval” of the cabinet, effectively allowing the prime minister to initiate dissolution at will. This so-called “Article 7 dissolution” has become routine. As a result, dissolutions have often functioned less as emergency responses to parliamentary deadlock and more as “strategic dissolutions”, timed for moments when the ruling party expects electoral advantage or when opposition forces are unprepared. Criticism of the “abuse of dissolution power” has accompanied this practice for decades.

A comparison with other democracies sharpens the picture. In the United States, there is no concept of dissolving the legislature at all, election dates are fixed, and the executive has no ability to manipulate electoral timing. In Germany, a chancellor cannot freely dissolve parliament, dissolution is possible only after a loss of confidence and requires the involvement of the federal president. The system is explicitly designed to prevent those in power from controlling election timing.

The United Kingdom offers a more complicated example. After introducing fixed parliamentary terms to curb prime ministerial discretion, it later reversed course with legislation in 2022, effectively restoring a system in which the prime minister may request dissolution from the monarch. In short, countries where prime ministers can lead dissolutions do exist. What makes Japan particularly problematic, however, is the lack of clearly defined constitutional conditions, a vacuum filled instead by political convention, allowing dissolution timing to become highly tactical and difficult to restrain.

Seen in this context, it is hardly surprising that Prime Minister Takaichi’s decision has drawn criticism as a “dissolution without a compelling cause.” What troubled me most was her explanation at the press conference. She stated:

「国論を二分するような大胆な政策、改革にも批判を恐れることなく、果敢に挑戦していきたい。だからこそ、政治の側の都合ではなくて、国民の皆様の意思に正面から問いかけるという道を選びました」

“I want to boldly pursue policies and reforms that may divide public opinion, without fearing criticism. That is precisely why I chose to ask the people directly for their judgment, not for the convenience of politics, but by confronting the will of the public head-on.”

At first glance, these words sound like a principled appeal to democratic legitimacy. The problem lies elsewhere: how concretely were these so-called “bold policies” presented to the electorate?
At the same conference, the prime minister spoke in broad terms about a “fundamentally new economic and fiscal policy” and a “major transformation of core national policies,” touching on themes such as enhanced intelligence capabilities, anti-espionage legislation, and what she calls “responsible proactive fiscal policy.” Yet what remained unclear was the level of detail necessary for voters to meaningfully decide whether they agree or disagree. What will be done, in what order, at what scale, and with what costs and trade-offs, all of this was left vague.

Some media reports have floated specific ideas, such as a temporary zero rate on food consumption tax. Even so, it is difficult to say that these individual proposals have been clearly organized and presented as the central themes of the dissolution.

Because elections must be held within the compressed timetable mandated by Article 54, clarity matters all the more. If dissolution is truly meant to “ask the people,” then what is being asked must be made explicit. To seek public trust while relying on abstract slogans, “we will implement it after we win”, and withholding concrete detail comes dangerously close, in legal terms, to a blanket mandate. A victory without clearly defined issues can be invoked to justify virtually any policy package as having received “the people’s approval.”

To dissolve parliament while calling an election “a test of the people’s will,” yet leaving the question itself deliberately blurred, risks using the outward form of democratic procedure to maximize the freedom of those who govern. I find that deeply unsettling...

Japan’s Inflation Trap: The Hidden Tax of Inflation in Japan

 When I think about Japan’s economy as a Japanese citizen, I cannot help but feel disheartened. The problem is not a single failure, but a structure in which monetary policy, fiscal policy, and exchange rates are entangled all at once, leaving very little room to escape. To begin with, Japan is already clearly in an inflationary phase. Consumer prices, both headline and core, have been rising at around 3% year-on-year, a level that can no longer be dismissed as temporary or blamed solely on imported inflation. Under normal circumstances, a central bank would respond by raising policy rates, supporting the currency, and anchoring inflation expectations. Yet the Bank of Japan, burdened by years of ultra-low interest rates and massive holdings of government bonds, finds it extremely difficult to make that obvious choice.

In the latest move, the policy rate was raised from 0.5% to 0.75%. What followed, however, was not a stronger yen, but a weaker one. This is a highly symbolic outcome. The fact that the yen was sold even after a rate hike indicates that markets have concluded this level of tightening is insufficient to control either inflation or fiscal risks. With inflation hovering around 3%, a policy rate of 0.75% still implies deeply negative real interest rates, offering little incentive to hold yen. Moreover, investors appear convinced that the Bank of Japan, constrained by political and fiscal considerations, will remain reluctant to normalize policy decisively. As a result, the perception has taken hold that rate hikes will remain small, cautious, and perpetually delayed, and the yen continues to be sold accordingly.

On December 19, immediately after the BOJ announced a rate hike, the yen weakened sharply

This monetary instability is being exacerbated by the government’s fiscal stance. The Takaichi administration’s slogan of “responsible proactive fiscal policy” is presented as a strategy to balance growth and national security, but in practice it deepens reliance on deficit-financed government bonds. Most of the supplementary budget is funded through new bond issuance, and even defense spending, long protected by the postwar taboo against deficit financing, has now crossed that line. Expanding defense expenditures to more than 3% of GDP without a clearly secured and sustainable tax base represents, from the market’s perspective, a clear retreat from fiscal discipline.

That judgment is already visible in the government bond market. Yields on 10-year Japanese government bonds have risen at a pace rarely seen before, reaching the 2% range. For decades, JGBs were regarded as immovable safe assets. What we are witnessing now is the beginning of a repricing driven by doubts about fiscal sustainability itself. Rising yields mean higher debt-servicing costs, translating into trillions of yen in additional fiscal burden. If those interest payments are then financed through yet more bond issuance, confidence in the yen will deteriorate further, setting the stage for renewed currency depreciation and accelerating inflation.

Sharp rise in 10-year JGB yields.

What makes Japan’s inflation problem particularly serious is that the country is drifting toward what economists call fiscal dominance. Japan’s total government debt stands at roughly 250% of GDP, an extraordinary level even among advanced economies. For a country carrying debt of this magnitude, rising interest rates are no longer merely a tool of macroeconomic adjustment; they are a direct threat to fiscal stability itself. Raise rates decisively, and debt-servicing costs explode. Suppress rates, and the currency weakens while inflation accelerates. When a central bank is effectively forced to prioritize government solvency over price stability, fiscal dominance has already set in, and markets are increasingly viewing Japan through that lens.

The people most directly affected by this situation are those whose assets and incomes are almost entirely denominated in yen. Banknotes issued by the Bank of Japan are, at their core, pieces of paper sustained by trust in the state and society, a human-based monetary system. When that trust erodes, the real value of savings is quietly shaved away. Unless wages consistently keep pace with prices, living standards will inevitably decline. Inflation is a process in which wealth erodes even without anyone explicitly taking it, and the burden falls disproportionately on those who hold only cash and yen deposits.

And yet, public sentiment is buoyed by the symbolism of Japan’s first female prime minister, with some people enthusiastically engaging in what they call “サナ活(Sana-katsu)”, a form of political fandom. Many of these supporters are ordinary citizens whose entire livelihoods depend on the credibility of the yen, and who have no way to escape shifts in currency or bond markets. A weaker yen raises the cost of imports, pushing food, energy, and daily necessities ever higher. Rising interest rates increase the burden of mortgages and loans, while a slowing economy places downward pressure on employment and wages. To hold only yen-denominated assets is to bear the full force of these structural changes.

This morning’s newspaper front page, approval ratings for the Takaichi cabinet remain strikingly high

Around the Takaichi administration, reflationists often repeat the claim that “because Japan issues debt in its own currency, fiscal collapse is impossible.” On an accounting level, this may sound persuasive. Japan issues government bonds in yen, and the BOJ can supply yen without limit. In that narrow sense, a formal default, an inability to repay principal and interest in nominal terms, is indeed unlikely. What this argument fatally overlooks, however, is that the central bank can create currency symbols, not economic value.

The yen functions as money only because it is supported by social trust, the belief that this piece of paper will continue to purchase goods and services in the future. As long as that trust holds, unlimited issuance may appear harmless. But trust is not unconditional. When money creation becomes excessive, inflation accelerates, and everyday life becomes unsustainable, people begin to avoid holding that currency altogether. A situation in which prices keep rising, wages fail to catch up, savings lose real value, and even basic necessities become difficult to afford constitutes a very real collapse from the perspective of ordinary people, even without any formal declaration of default.

Ultimately, the phrase “there will be no fiscal collapse” protects the state’s appearance, not the lives of its citizens. An economy in which ordinary people can no longer sustain their livelihoods cannot be called healthy, no matter how carefully its books are balanced. Currency is nothing more, and nothing less, than a network of human trust. When that trust breaks, collapse has already occurred.

Japan’s economy now stands at a critical juncture. This is not a question of right versus left, nor an ideological debate. It is a concrete and unavoidable issue for everyone whose life is denominated in yen. The Takaichi cabinet enjoys approval ratings near 70%, and many people hope its economic policies will succeed. But markets are relentlessly honest.

A Crisis Made at Home

 On November 7th, during a session of Japan’s Lower House Budget Committee, Prime Minister Takaichi made a remark that immediately stirred controversy. She was asked whether a Chinese maritime blockade of Taiwan would constitute a “situation threatening Japan’s survival,” which would legally enable Japan to exercise collective self-defense. Her answer was blunt: “If battleships are deployed and the use of force is involved, then yes, it could fall under that category.”

In effect, the prime minister had suggested that a Taiwan contingency might trigger Japanese military involvement, a statement of enormous weight in East Asian security.

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The reaction was swift. The Chinese Consul General in Osaka posted on X in Japanese,

“If that filthy head of yours sticks itself in where it doesn’t belong, we’ll cut it off without hesitation.”

Japanese social media erupted with outrage, “Stand firm against China!” “Don’t tolerate insults to the prime minister!”—an explosion of pure emotion, detached from context or strategy.

The diplomat’s comment was, of course, wildly inappropriate and unbecoming of his position. But what troubles me far more is why the prime minister chose to recklessly abandon the strategic ambiguity that Japan, and the United States, have spent decades maintaining in order to prevent precisely this sort of escalation.

Former Prime Minister Shigeru Ishiba criticized her remarks succinctly,

“No previous administration has ever defined specific cases regarding Taiwan. That is something governments have deliberately avoided.”

Indeed. And not only in Japan. Even the United States officially upholds the “One China” policy and refrains from stating clearly what Taiwan’s legal status should be. Donald Trump—often caricatured as impulsive—never overturned the Republican Party’s long-standing strategic ambiguity. President Biden, on the other hand, has repeatedly hinted that the U.S. would defend Taiwan militarily, only for the White House to rush out statements afterward insisting that “U.S. policy has not changed.”

The danger of Takaichi’s remark lies in the opposite response, there was no clarification, no correction, only a doubling down. On November 10th, when pressed to retract her statement, she refused, saying only that her remarks “did not alter the government’s traditional stance.”

To even discuss this issue responsibly, one needs at least a minimal grasp of modern history. Many of those shouting patriotic slogans online seem unaware of how we arrived at the current delicate balance. At the very least, one must understand the chain of events from Chiang Kai-shek’s Nationalist government in the 1920s to the 1979 normalization of U.S.–China relations. Without that, any opinion offered is little more than noise.

The story, in brief, is this,
In 1928 the Nationalist government established itself in Nanjing. Japan’s 1931 Manchurian Incident and the 1937 Marco Polo Bridge Incident pushed China into full-scale war, during which the Nationalists and Communists formed a temporary united front. After Japan’s defeat in 1945, the Soviets entered Manchuria and handed vast quantities of captured Japanese weapons to the Chinese Communist Party, allowing the Chinese Civil War to reignite in 1946.
By 1949, the Communists had won. Mao Zedong declared the founding of the People’s Republic of China in Beijing, while Chiang Kai-shek retreated to Taiwan, continuing the Republic of China there. Both governments claimed to be the sole legitimate regime of all China. For two decades, the world largely recognized Taiwan as “China.” But in 1971 the UN transferred China’s seat from Taipei to Beijing. Japan normalized relations with the PRC in 1972, and the United States followed in 1979. Yet Washington could not simply abandon Taiwan; it was politically impossible. So Congress created the Taiwan Relations Act—neither an alliance nor formal recognition, but a legal mechanism allowing the U.S. to support Taiwan indefinitely.

And so a diplomatic “sacred zone” was born. Since 1979, U.S. policy has rested on three pillars,

• Taiwan is not recognized as a sovereign state, but neither is it accepted as part of China.
  
  

• The U.S. opposes any attempt by China to take Taiwan by force.
  
  

• Whether the U.S. would intervene militarily is left deliberately undefined.
  

The entire architecture of peace in the Taiwan Strait relies on this studied vagueness. Takaichi’s remarks stomped directly onto this diplomatic landmine.

For more than seventy years, Beijing has told its domestic audience, “Japan still believes Taiwan belongs to them.” It was propaganda—but now, thanks to the prime minister’s comment, China can say, “See? We were right.” Japan has handed them a perfect narrative weapon. Diplomatically, it is difficult to imagine a worse move.

Article 3 of the Joint Communique of the Government of Japan and the Government of the People's Republic of China states, “The Government of the People's Republic of China reiterates that Taiwan is an inalienable part of the territory of the People's Republic of China. The Government of Japan fully understands and respects this stand of the Government of the People's Republic of China, and it firmly maintains its stand under Article 8 of the Postsdam Proclamation.”

A brief aside: the prime minister used the word “battleship.” There are no battleships in active service anywhere in the world today. A battleship is a specific type of capital ship, long obsolete, its last combat deployment was in the 1991 Gulf War. For a sitting prime minister to use that word in the context of modern security policy betrays a rather worrying lack of basic military literacy.

And while the Chinese diplomat’s language was outrageous, the so-called Japanese “patriots” raging on social media may be even more dangerous to Japan’s future. They know no history, no international norms, no diplomatic logic. They shout “Be firm!” and “Don’t lose to China!” without the faintest idea of why the prime minister’s remark is destabilizing. Ignorance is not harmless, it is often the most destructive weapon a nation can wield against itself.

If I were to describe the odd discomfort I felt watching this unfold, it would be something like this, imagine a married couple having an argument. Out of nowhere, the wife’s ex-boyfriend from decades ago barges in, uninvited, and snarls at the husband, “Lay a hand on her and I’ll take you down myself.” That is the level of absurdity we are dealing with. And the unsettling part is that there are people who look at this behavior and call it “brave.” Where this situation will drift from here, I can’t help but worry.