Will a fiscal mess thwart Japan’s nascent economic growth?

When moody’sGDPbj, a research firm, cut Japan’s top-grade credit rating and warned of a “significant deterioration in the government’s fiscal position”, Nintendo’s first colour Game Boy was taking the world by storm and Japan’s net government debt ran to 54% of . Twenty-five years later that figure stands at 159%. The growth has been cushioned by a fall in government bond yields, which means that Japan paid less interest to its creditors last year than it did three decades ago. But now Moody’s warning may finally come true.That is because refinancing is becoming more expensive. Ten-year government bond yields have risen from, in effect, zero three years ago to around 0.7% now. A rise in inflation has forced the Bank of Japan (o) to all but abandon its policy of capping long-term bond yields. The next step may be to raise short-term interest rates for the first time since 2007. Central banks elsewhere are considering cutting rates; Japan is moving in the opposite direction.