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Big debt, no budget and now no prime minister.
That's the situation in France where its economy is on edge.
It's World Business Express from the BBC World Service.
I'm Sarah Rogers.
No prime minister in France, but Japan's about to get a new one, sending stocks surging.
And is the UK's biggest carmaker getting back into gear?
Yes, we'll start with the French government falling apart again over how to handle its public spending budget.
Sébastien Lecornu quit after 26 days in charge, the third to leave office in just over a year.
And it happened 14 hours after forming the new government.
Being Prime Minister is a difficult task, probably even more so at the moment, because the conditions are not right.
However, for three weeks I have been trying to build the right conditions to pass a budget for France.
But working with the opposition, I got the feeling we were always taking two steps forward and one step back.
Sébastien Lecourneau speaking in Paris.
Well, President Macron has tasked his prime ministers with slimming down budgets, but it's not working.
France has the Eurozone's largest deficit of approximately $4 trillion.
Let's put this into some context with Charlotte de Montpellier, senior economist at ING.
The budgetary situation of France is quite difficult at this stage, meaning that we have a very big deficit 54 of GDP for this year.
And it means that basically France has to do some savings.
So I would say that the latest development means that having a budget before the end of the year for next year is even less likely.
This means basically that the budgetary situation is even more difficult and that the debt-to-GDP ratio is going to increase even more, probably to 117 next year.
So that's huge, that's big.
Of course, this uncertainty is also having an impact on the economy itself, and you don't know what will happen with the taxes, with the next budget, new government.
And so you see companies and people being a bit worried and postponing some plans.
So also it means lower growth for France.
So this political situation that is a crisis is also having a very big impact on the budgetary situation, but also on the economic outlook for France.
So does this just plunge France further into the unknown then?
Yeah, I would say that.
We don't know what will happen next.
One possibility is that there is a new snap election, legislative one, that could happen.
Macron can decide to appoint a new prime minister.
It will be the fourth, but OK, why not?
All in all, this political situation has become even more complicated and there is no end in sight of this political drama.
The fourth prime minister, why not, says Charlotte de Montpellier.
But if you're trying to run a business in France, is this worrying or just more of the same?
Fred Gintran is president of OMI, which is a trade organisation representing restaurateurs.
The absence of functioning governments and the lack of clear short, medium and long-term strategies represent a real problem for entrepreneurs.
I don't think this will immediately harm business activity because, unfortunately, the French have grown accustomed to this uncertainly over the past few years.
My concern stems from the fact that we now need answers.
As business owners, what we expect today is to protect companies, protect jobs and respond to the needs of entrepreneurs, namely lowering labour costs, ensuring the fair wage increases and promoting a better sharing of wealth Well, let's bring in Rachel Wynne to my guest for today, Partner and Investment Manager at Killik & Co.
Quite a big market reaction there, Rachel.
Yes, quite a negative reaction.
So we have seen French equities falling today.
They are down over 1%.
And that's on a day when American equities are up.
So we can see there is a relatively negative reaction there in France.
And we can also see a negative reaction when we look at French government debt markets.
If we look at the yield on French government bonds, we can see that that has risen over the last three months.
And that means that investors have been selling French government debt.
Thanks very much, Rachel.
Do stay there because I've got more that I want to ask you about later on.
But now we're going to head to Japan, where stocks hit a record high after Sunai Takeuchi won the leadership of the governing Liberal Democrat Party, which positions her to be Japan's first female prime minister.
Let's hear a bit more from the BBC's Suranjana Tiwari.
Sanai Takaichi is a veteran lawmaker and a devotee of the Abenomics policies of the late Shinzo Abe, which include boosting the economy with aggressive spending and lower interest rates.
That kind of spending shift could spook investors, who are already worried about Japan's debt load, which is among the highest in the world.
Well, as you just heard there from Suranjana Tiwari, concern over aggressive spending.
So was the rally just a knee-jerk reaction then?
Sayuri Seai is a former Bank of Japan board member and is now an economist at Keio University.
Among five candidates, she's the one who is proposing. expansionary fiscal policy.
Another reason is that she is consistently criticising BOJ's efforts to raise interest rates.
So having more expansionary policy and maintaining low interest rates, that's good for the stocks and a large corporate sector, but means more depreciated exchanges, means higher imported prices.
Is her room to manoeuvre limited because of rising inflation?
Here is the difficulty.
I know why we are having inflation over 2% since 2022.
The main reason is because of yen sharp depreciation.
But as long as yen is so cheap and we have to import a lot of goods and services at very expensive prices, the Japanese consumers are never happy.
So they will continue to request more tax cuts.
In your view, ex-board member of the Bank of Japan...
What needs to happen there economically to get the balance right?
Should let BOJ to raise interest rate.
They cannot raise the interest rate a lot because the economy is so weak.
But they try to correct this excessively cheap Japanese yen.
So if she stopped BOJ to do that, then we might have more depreciation and more imported prices.
So some challenges ahead there based on what you've just said.
But another challenge might also be from a visit from Donald Trump this month.
There was the 15% tariff trade deal, but part of that was $550 billion of investment from Japan.
And we're hearing that maybe a renegotiation on the cards?
Yes.
There may be cases that Japan does not get a lot of benefit, but maybe take a lot of high risk.
So that's why Takahashi-san during the election campaign, she said, If there is unfair practices related to this investment, she might renegotiate.
Sayuri Shiai, former Bank of Japan board member.
Let's bring Rachel Winter back, partner and investment manager at Killik & Co.
So we're hearing about politics and moving markets, but is that turning investors elsewhere?
A record for Bitcoin over the weekend.
Yes, Bitcoin hit a price of $125,000 over the weekend.
So as you say, that is a record high.
Although Bitcoin can be quite volatile, Some people do view it as an alternative asset or as a safe haven.
And you will be aware that the US government is currently in a state of shutdown.
That could mean that people don't want to hold the dollar.
And therefore, some of those people might be holding Bitcoin instead.
But for the more cautious amongst us, Rachel, it's gold, isn't it?
Yes, gold has had an incredible run.
It's nearly $4,000 per ounce.
The price is up 50% in a year.
And it's the best rally that gold has had since the 1970s.
And as you say, that could be because some people view gold as a safe haven.
And it's also the case that gold trades in dollars.
And because the dollar is quite weak at the moment, that will have made gold more attractive to some investors.
Thanks, Rachel Winter from Killikin Co.
And UK carmaker Jaguar, Land Rover and Japanese brewery Asahi are showing signs of recovery after separate cyber attacks.
Manufacturing will resume first at JLR's engine factory, whilst other sites will return gradually.
And Asahi has partly restarted production in all six of its breweries in Japan.
And that's it from World Business Express with me, Sarah Rogers.
Please do subscribe, though, to get the latest episodes.
Search for World Business Express.
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