The plan to raise the caps on postal savings deposits and life insurance is being interpreted by some as positive for Japanese government bonds (JGBs) and by others as a major threat to the banking system. In fact the direct effects, good or bad, are likely to be small. However, the mess being made of reforms to Japan Post does not increase confidence in the government’s ability to come up with a credible medium-term fiscal plan. This could ultimately prove to be very negative for JGBs
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