In a dramatic turn this morning, global financial markets surged as major economies doubled down on expansionary policies — a bold gamble amid lingering inflation and debt pressures. Rather than pull back, governments are turning the throttle up.
Tokyo, Paris, Washington — they’re all in. Japan’s ruling party moved decisively over the weekend, electing Sanae Takaichi as new party head, positioning her to become Japan’s first woman prime minister. She’s immediately pushed for aggressive fiscal stimulus and told reporters that “prices rising from raw materials don’t mean victory over deflation yet.” Analysts say her win makes it less likely the Bank of Japan will hike rates this month — though further increases aren’t off the table.
Meanwhile in France, political stability is unraveling. Prime Minister Sébastien Lecornu and his government resigned within hours of unveiling their cabinet — making it one of the shortest-lived in recent memory. The ripple effect was immediate: French bond yields jumped, the euro dipped, and investors scrambled for safe havens.
Across the Atlantic, the United States is facing a full-blown partial government shutdown after Congress failed to pass funding bills. More than 750,000 federal workers were told to stay home or work without pay. In a startling move, the White House froze $26 billion in funding allocated to states led by Democrats, drawing fierce backlash from party leaders. Senate Democrats called it “using the American people as pawns.”
But despite fears of economic stress, the markets didn’t retreat. Equity indices rallied and gold hit near-record highs, signaling that investors are betting on strong demand and central banks keeping interest rates lower for longer.
In Asia, signs of underlying strain make this all the more precarious. Factory activity in China and much of the region shrank last month, pointing to lower global demand and export pressures. Yet in South Korea, exports surged — driven by AI demand — offering a glimpse of what might pull the world out of the mire.
The tension is clear: loose fiscal and monetary policies may juice growth in the short run, but risk inflation flare-ups, asset bubbles, and financial instability. Observers warn the balance is delicate.
In Tokyo’s media center early today, reporters gathered as Takaichi addressed the next steps. Her voice steadied, she reiterated support for pro-growth measures. “We must lead demand, not just passively adapt,” she said. Her rise has already shifted expectations: rate hikes may be delayed, and government spending will take center stage.
In Paris, unions and citizens watched in disbelief as the government imploded. Sophie Binet of the CGT union told one broadcaster, “First we want to know who the government is, then what the budget will be. If the budget is burdensome, we won’t let it pass.” Protesters earlier had already blocked high schools and rallied in dozens of cities over proposed cuts.
Washington’s streets are quieter, but the stakes are no smaller. A furious political fight is underway over budget priorities and partisan power. Democratic leaders accuse the administration of weaponizing the shutdown. Republicans blame obstruction. The clock is ticking.
Tonight, the world watches. Leaders are choosing risk — betting that markets and consumers can take it. But the consequences could be brutal if the gamble fails. The air is charged with uncertainty, where ambition collides with reality, and only time will tell which side prevails.
Source: Reuters
