You might have read that Japanese leader Sanae Takaichi has a new friend. “Japan’s PM: I’m so lonely I befriended a cockroach,” ran the headline in the UK’s Telegraph this week. A single tweet of the article has received over 8 million views.
It’s a great story with one problem: It is not remotely true.
The saga stems from a Takaichi tweet in which she said that while her official residence has a reputation for being haunted, it was not a ghost that made her scream but a cockroach. Citing a belief in reincarnation, she couldn’t bring herself to kill the pest; when she found out that her staff had arranged for an extermination, she expressed mild regret.
Most headlines in the Tokyo media reported on how bizarre the international coverage was, with one asking “translation error, or ridicule?”
You might well ask, who cares? This is Japan, after all, the country about which you can write anything and worry later if it’s true, from fictional eyeball-lickers to supposed post-covid-mask smile coaches. Normally, these stories do not have much impact on anything. Except, as this episode shows, official communications can be misread, deliberately or not. Consider what that means for the increasingly sensitive yen and bond markets.
As the Bank of Japan (BoJ) retreats from the bond market, foreign investors are increasingly dictating prices. They own only about 13% of outstanding Japanese government bonds, but now account for up to 30% of purchases of the benchmark 10-year, and dominate the short-term bill market. The foreign-exchange market is of course international, with the carry trade and recent US intervention amplifying that interest.
But the Japanese government still communicates as though domestic institutions are the only audience that matters. It was caught flat-footed earlier this summer when international investors misinterpreted domestic-focused early leaks of a key economic document to mean profligate spending and opposition to BoJ independence. Yields spiked in response.
Communication needs to be crafted with this kind of reaction in mind. Many are just not familiar with the realities of Japan’s debt situation—that while gross debt is high, so are its assets, meaning net debt is far more manageable than it looks; that its primary budget deficit is now one the lowest among its peers; that forecasts for debt-servicing costs include both interest and principal, unlike the net-interest figures commonly cited for the US.
I have encountered some who think that the entirety of Takaichi’s 370 trillion yen ($2.3 trillion) public-private investment plan is going to be funded by new government bond issuance. Not only is this wildly incorrect, even if the administration wanted to spend this much (and it doesn’t), practical constraints mean it would be impossible. It’s like betting on land prices expecting the first Trump administration to actually build the wall.
Given that the eyes of the world are on Japan in a way they have rarely been before, the old communications model—in which news is leaked first to the domestic press, with the international reaction an afterthought, if it’s thought about at all—needs a revamp.
A growing narrative considers the prime minister to be a spendthrift in a country that is already on the fiscal ropes. This supposed imminent collapse is now an increasingly prominent explanation for the yen still testing 160, despite a reduced interest rate gap with the US, Japan’s central bank conveying an increased pace of rate hikes and prospects of tighter Federal Reserve policy receding.
“Is Japan bust? You’d think so reading recent coverage,” is an accurate summary from Nicholas Smith, a veteran Japan strategist who recently left CLSA, referring to often hyperbolic reports.
The prime minister also faces a powerful domestic perception, deeply entrenched in the finance ministry and local commentary, that warns of imminent fiscal calamity. It is simple to grasp, and so it travels very easily overseas. If she wants room to pursue her ambitious growth plans, it is a perception she must fight.
AI translation might mean that language is increasingly a solved problem. But while AI can provide context—interpreting that cockroach anecdote or illuminating the realities of Japan’s fiscal situation—it won’t do it unless asked. Providing that detail is the job of Takaichi’s government; hoping for understanding to emerge is a fool’s errand.
Thanks to her staff, Japan’s prime minister may not need to call an exterminator anymore. But there is someone else she might need: an international communications specialist. ©Bloomberg
The author is a Bloomberg Opinion columnist covering Japan and the Koreas.