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DECISIONS over government spending took centrestage on global trading floors last week, with the United States and Japan taking very different approaches to resolving their budget woes.儲存Markets watched bemusedly as US House Republicans refused to pass the government's spending Bill until their demands on a separate health-care law were met, forcing federal operations to shut down for the first time in 17 years.Traders were little concerned at first: US stocks rose on the first day of the shutdown and Asian bourses shrugged off the fuss early in the week. But nerves started to fray as the shutdown wore on.Economists, the International Monetary Fund and world governments have warned about the adverse economic impact of a prolonged shutdown. Businesses are also fretting, with layoffs and production halts at US manufacturers that supply the government.Meanwhile, markets are now eyeing another impending political stand-off: a fight over the US government's borrowing limits.As it stands now, the US government is due to run out of borrowed money to pay its bills on Oct 17. If its US$16.7 trillion (S$21 trillion) debt ceiling is not raised by Congress by then, the world's largest economy could default on its debts for the first time ever.The US Treasury has warned that the mere spectre of default could "roil financial markets and damage the economy", with effects that may last a generation.The last serious debt limit crisis faced by the US was in August 2011, when a last-minute deal to extend US borrowing failed to prevent carnage in stock markets or ratings agency Standard & Poor's from downgrading US sovereign debt for the first time ever.Sself storageill, Credit Suisse has noted that the economic backdrop is better this time, with the US in a stronger fiscal position and global growth picking up.It also helps that on the other side of the world, Japan is doing a better job of fixing its finances.Prime Minister Shinzo Abe last week said he will proceed to hike the consumption tax next April as part of a plan to narrow Japan's budget deficit, the largest in the world relative to its economy. To cushion the economic impact, the government will roll out a 5 trillion yen (S$64 billion) stimulus package. Ratings agency Moody's said it will help Japan manage its high debt and maintain market confidence in Japanese bonds.The upside for markets from all these fiscal manoeuvrings is that monetary policy is likely to stay loose for longer, meaning more liquidity to boost asset prices.In the US, the precarious economic climate has reduced the chances of the central bank pulling back on its monetary stimulus in the near term. "Because of the uncertainty in Washington and potential risks of renewed fiscal headwinds... monetary policy will stay on hold for now," said Schroders head of US multi-sector fixed income David Harris.Japan's monetary easing is also expected to remain aggressive, with the Bank of Japan pledging to step in if the tax hike derails the economy.HSBC economist Izumi Devalier expects it to step up its asset purchases in the second quarter next year, most likely in April.These monetary machinations will provide some relief to their respective economies, but they can only be temporary. Governments still have to take serious steps to get their finances in order.fiochan@sph.com.sg迷利倉