Greece Is (Not) the Word in Japan

Taku Eto may forever be known as Japan’s modern-day Marie Antoinette. 

At a time when the price of rice is at a record high, Eto, the country’s farm minister, essentially told the population: If the staple is too expensive, let them eat the rice they get for free. 

“I’ve never bought rice. I get so much from supporters that I have enough to sell,” he told a fundraising event at the weekend, in comments he later said were merely meant to elicit a laugh. Few were amused in a country where the price of the staple food has doubled over the past year. Eto, unsurprisingly, lost his job just days later.

“As the person who appointed him, I apologize,” Prime Minister Shigeru Ishiba told reporters on Tuesday. “It’s a huge problem to make these remarks when voters are upset and concerned” about both the availability of rice and the eye-watering cost. 

Ishiba’s not wrong on Eto — despite his brief attempt to retain the minister in his post. But the prime minister should look in the mirror: While the domestic media was focused on Ricegate, on Monday, Ishiba himself said something every bit as ill-advised and potentially far more damaging. 

“Our country’s fiscal situation is undoubtedly extremely poor, worse than Greece,” the premier told parliament. The context was a debate on possibly cutting the country’s sales tax, with Ishiba pushing back against calls for it to be reduced.

But his comments came at the worst possible time. With markets already jumpy about rising bond yields amid the Bank of Japan’s gradual withdrawal of bond buying as it seeks to undo decades of monetary easing, Ishiba not only helped trigger a further jump in the cost of borrowing. He has thrust the issue of Japan’s fiscal situation, which had largely fallen off the front pages in recent years, back into the spotlight. 

Ishiba failed to understand his audience. The comments were likely intended to play well to a domestic public clamoring for tax cuts amid the first inflation in a generation but won’t accept any decline in government services. But particularly in this day and age — and coming just days after Moody’s Ratings downgraded the US sovereign rating — it’s dangerous to throw around quotes that will reignite pressure on Japanese debt, particularly following years of relative spending diligence. 

Ishiba is right to rule out consumption-tax cuts, a populist, unwise suggestion even on a temporary basis, as I argued recently. But it’s just as irresponsible to trigger a potential taper tantrum merely to win a domestic sparring match.

The invocation of Greece shows how badly Ishiba remains stuck in the past. The remark echoed that of an ill-fated predecessor: In 2010, then-Prime Minister Naoto Kan evoked the specter of a Greek-style debt crisis in comments that shocked the nation in his call for higher taxes. And in any case, the fiscal situation in Athens these days is much improved, with Moody’s raising the country to investment grade in March. 

Even if we assume Ishiba was referring to the euro-zone crisis era, he’s still just as wrong as Kan was to draw the comparison. Yes, Japan has a significant debt burden — at 240% of gross domestic product, the largest in the world, according to the OECD. But the similarities with Athens end there. Greece became the issue it did not only due to its debt pile, but also because it couldn’t control its own currency, and, crucially, most of its debt was owned by foreign investors. 

Neither of these are problems that afflict Japan. The vast majority of its debt is held internally, by the Bank of Japan along with banks, insurers, pension funds and so on. Foreign investors hold just 6.4%. But it’s also the largest creditor nation in the world and has an embarrassment of riches in its net government and household assets. 

For these reasons, the endless gold bugs and Bitcoin bros salivating over the prospect of an impending Japanese fiscal collapse will be disappointed yet again. What afflicts Japanese debt is a gap between supply and demand, with investors thrown off by global uncertainty. It seems increasingly likely that the Bank of Japan will be forced to step back in, a move in the wrong direction for Governor Kazuo Ueda. 

Ishiba’s comments make steps like that more plausible by piling pressure on bond yields. In other words, the only crisis likely in Japan will be one of its own making. Someone in his position should be aware of that. With apologies to Marie Antoinette, this is no time to lose one’s head. 

More From Bloomberg Opinion: 

Eto’s is a real quote, even if Marie Antoinette’s famous “let them eat cake” line is widely regarded as apocryphal.

This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Gearoid Reidy is a Bloomberg Opinion columnist covering Japan and the Koreas. He previously led the breaking news team in North Asia, and was the Tokyo deputy bureau chief.

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