2  BIS central bankers’ speeches  To date, the savings of Japanese household and firms have been more than enough to finance the government deficit; indeed, interest rates on government debt have fallen to near record lows. Accordingly, Japan, like the United States, has the scope to carry out fiscal consolidation plans that address long-run sustainability issues without endangering near-term growth prospects.
Currently, policymakers in both Japan and the United States face the challenge of designing policies that provide a credible commitment to medium-term deficit reduction without disrupting the fragile recovery. But once in place, such policies should help reduce uncertainty and boost household and business confidence.