Britain’s economy takes a pounding

Investors are still reeling from Kwasi Kwarteng’s fiscal statement last Friday, when the new British finance minister breezily announced the biggest tax cuts in half a century, along with measures that will increase borrowing by 3% of GDP this year. After weekend reports of yet more fiscal largesse to come, the pound dropped to a record low against the dollar in the early hours of Monday, before recovering some ground.

On Tuesday the government will feel the consequences of its actions further, when it tries to borrow £1.2bn ($1.3bn) in inflation-linked gilts maturing in 2031. At 9am on September 23rd the market interest rate for unlinked gilts was 3.46%, but by close of play on Monday it had climbed to 4.1%. On Sunday Mr Kwarteng declined to comment on short-term market moves, claiming that he was focusing on growth. But unless something changes to bolster investors’ trust, the clamour to change course will be hard to ignore.

Japan’s controversial state funeral

Last week world leaders gathered at Westminster Abbey to mourn the death of Queen Elizabeth II. On Tuesday many of them flocked to the other side of the world to attend the state funeral in Tokyo of Abe Shinzo, a former Japanese prime minister, who was assassinated in July.

Japan’s current prime minister, Kishida Fumio, hopes the event will boost the country’s presence on the global stage. But the plan has been hugely unpopular among Japanese thanks to Abe’s controversial legacy, which includes downplaying the nation’s wartime atrocities, and the cost, estimated at about ¥1.66bn ($11.8m). A poll in mid-September by Nikkei, a media giant, found that only 33% of the public favoured holding the funeral. It also revealed that the approval rating for Mr Kishida’s government had plunged from 57% in August to 43%. Protests are expected across the country.

Rumours abound that such opposition could push the government into holding a snap election this autumn. Conversely, once the funeral is over and the Japanese have witnessed global dignitaries paying tribute to Abe, that opposition might fade.

Never assume the obvious is true.
--William Safire

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