米債務上限 薄氷の妥協でデフォルト回避

The Yomiuri Shimbun (Aug. 3, 2011)
U.S. default avoided, but dangers persist
米債務上限 薄氷の妥協でデフォルト回避(8月2日付・読売社説)

U.S. President Barack Obama reached an agreement with U.S. Republican and Democratic leaders to raise the debt ceiling of the U.S. government.

The U.S. federal debt was projected to reach its current statutory limit of 14.3 trillion dollars (about 1.1 yen quadrillion), with the deadline coming on Tuesday.

We welcome the news that the U.S. government managed to avoid the worst-case scenario of default on payments to investors in Treasury bonds.

Should the U.S. government fall into default, the markets' faith in the dollar--the world's key currency--would plummet.

The prices of the U.S. Treasury bonds held by other major countries and financial institutions around the world would also plummet, throwing the financial markets into major turmoil.

On the foreign currency markets, dollar-selling pressure has eased, apparently out of a sense of relief, putting a temporary brake on the sharp appreciation of the yen and the fall of the dollar.

Stock prices on the Japanese and other Asian markets turned upward across the board.

Further stability in the financial markets is desirable.


Budget-cutting to begin

According to Obama, the agreement would have the federal government cut its fiscal deficit by 2.4 trillion dollars over 10 years, while allowing the administration to raise the debt ceiling on a similar scale in two stages.

Initially, a spending cut of 900 billion dollars would be made, while the debt ceiling would be raised by the same amount immediately.

Then, a suprapartisan committee to be set up within Congress will work out a plan to cut the fiscal deficit by another 1.5 trillion dollars within the year, while again raising the debt limit by a matching amount.

Both houses of Congress should quickly pass the bill, worked out on the basis of the accord, and Obama should sign it into law.

The focal point from now on will be a deficit-cutting plan to be discussed by the new congressional committee.

The tea party wing of the Republican Party, which made a rapid advance in last year's midterm elections, opposes a tax increase.

The tea party movement remains far apart from the Democrats and Obama, who wants to realize fiscal reconstruction through a combination of spending cuts and tax hikes.

We wonder whether the two sides will be able to agree on any effective deficit-cutting plan, with the political maneuvering over the presidential election for next autumn already a factor.

The pros and cons of tax increases will probably become a major point of contention.


Risks remain real

If the negotiations face rough going, with Republicans and Democrats locked in a tug-of-war over the plan, and if the deficit-cutting measure ends up being insufficient, credit-rating agencies may still downgrade Treasury bonds, raising fears of adverse effects on the world's markets.

The president must exercise leadership in getting the U.S. fiscal house in order.

Both houses of Congress also have grave responsibility.

Meanwhile, the yen's appreciation continues, with the currency in record strong territory of 76 yen to the dollar, causing hardships in the Japanese economy.

The yen's rise puts pressure on the earnings of export-oriented firms, thus hindering Japan's economic recovery.  円高は輸出企業の収益を圧迫し、景気回復の足を引っ張る。

Should Japanese firms accelerate their moves to shift production abroad to cope with the yen's rise, it would bring about a hollowing-out of the nation's industries.

We hope Japanese companies will work out better strategies to deal with the excessive rise of the yen.

The government should also expand its support to them.

(From The Yomiuri Shimbun, Aug. 2, 2011)
(2011年8月2日01時39分 読売新聞)

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