The aggressive fiscal policy that has become the hallmark of Prime Minister Sanae Takaichi's administration has triggered a wave of "Japan selling" in financial markets. It was an extraordinarily clumsy policy move.

The yen has fallen, hitting the 163-yen range against the dollar, a historic low not seen in about 39 years. The worsening situation in the Middle East, which prompted dollar-buying as a currency considered strong in times of emergency, was one factor. But at the root of the yen's weakness is the Basic Policy on Economic and Fiscal Management and Reform, or the so-called "Big-boned Policy," approved by the Takaichi Cabinet.

What rattled the markets was the draft policy released at the end of June. It explicitly stated that "to achieve a strong economy, it is also extremely important that appropriate monetary policy be implemented." Market players took this as "a check on the Bank of Japan's interest rate hikes." A sense of vigilance spread that if rising prices accelerated, interest rates, which tend to move in tandem with prices, would also rise, increasing the government's interest payments on its bonds.

The disappearance of the phrase "fiscal consolidation," which had been mentioned in the policy until last year, also heightened concern that the country's already debt-ridden finances would worsen and undermine the government's credibility.

Japanese government bonds were sold, and long-term interest rates briefly reached 2.9%, hitting a roughly 30-year high. The yen's depreciation also gained traction, and the developments came to be dubbed the "Big-boned Policy shock."

It is only natural that markets grew more anxious. The Big-boned Policy emphasized that high growth would be pursued through large-scale public-private investment exceeding 370 trillion yen (approx. $2.26 trillion), but that is an overly optimistic assumption. The government has not shown specific funding sources, either. If the policy fails to yield results, Japan will only sink deeper into debt.

The prime minister insisted, "I do not believe that a draft that had not even been approved by the Cabinet was the cause of the shock," but she was probably startled by market reaction. An annotation showing consideration for the Bank of Japan's independence was hastily added to the policy text.

What cannot be overlooked is Finance Minister Satsuki Katayama's remark about the funds that manage pension reserves: "I would like to pursue measures to encourage them in the direction of investing further in Japanese financial assets."

Markets took this as a sign the government intended to use the enormous pension reserves to support purchases of Japanese government bonds, and interest rates have fallen for the time being. However, pensions are precious assets that support people's lives in old age. It is unacceptable to change where they are invested for the administration's own convenience.

As the Big-boned Policy ended up not reviving the phrase "fiscal consolidation," concerns remain that budgets will snowball without restraint. Should the government merely keep repeating stopgap responses, it will not dispel investors' distrust.

If markets remain unstable, the economy will also struggle to grow. It is the government's responsibility to break with lavish spending and set out a path toward restoring fiscal soundness.