“We will implement a strategic budget expenditure to protect the lives of the population and build a solid economy,” the Prime Minister stated in a televised address after the Cabinet approved the package.
Aside from short-term inflation relief measures, Takaichi disclosed that the new Japanese executive plans to boost investment in key sectors like shipbuilding and artificial intelligence, strategic investments aimed at strengthening the growth of the world’s fourth-largest economy.
The leader, who took office a month ago and is known for her expansionist policy stance, committed to prioritizing measures to mitigate the impact of persistent inflation in the Asian country amid real wage stagnation.
Japan’s Consumer Price Index (CPI) rose 3% in October, the Japanese government revealed today, remaining above the Bank of Japan’s (BoJ) 2% target, setting the stage for a rate hike.
The statistical data comes after BoJ Governor Kazuo Ueda, during the first meeting with Takaichi last Tuesday, emphasized the importance of inflation reaching 2%.
The Bank of Japan last raised its benchmark interest rates in January to 0.5%, the third increase in a year, ending over a decade of low rates aimed at pulling the country out of a prolonged deflationary cycle.
This normalization cycle was interrupted as the BoJ carefully evaluates the impact of U.S. tariffs and the effect of the newly announced economic stimulus project by Takaichi.
“What Japan should do now is not weaken its national strength with excessive austerity measures, but rather strengthen its national power with proactive fiscal policies,” Takaichi stated today. The declaration is likely to resonate in the BoJ policy room.
“While promoting a strong economy and increasing the growth rate, we will reduce the public debt/GDP ratio, achieve fiscal sustainability, and ensure market confidence,” the leader added.
In addition to short-term inflation relief measures, Takaichi revealed that the new Japanese government plans to boost investment in key sectors like shipbuilding and artificial intelligence, strategic investments to strengthen economic growth.
To finance the package, Takaichi’s government plans to draft a supplementary budget of 17.7 trillion yen (97.5 billion euros) for the current fiscal year, ending in March 2026, marking the largest economic stimulus since the coronavirus pandemic.
The total value of the package, combining local government and private sector spending, is expected to exceed 42 trillion yen (231.5 billion euros), according to the local news agency Kyodo, a 7.7% increase from the previous year’s total.
The new stimulus package includes measures to sustain the economy amid concerns that the aggressive U.S. tariff policy could harm both businesses and individuals, subsequently affecting corporate investment and domestic consumption, a pillar of Japanese GDP.
The sources of funding will come from increased tax and non-tax revenues, and any deficit will be covered by issuing government bonds.
The Japanese government aims to pass the budget before the closure of the current extraordinary session of the Diet, the national parliament, on December 17.
If approved, the supplementary budget will be 27% higher than the one passed in the previous fiscal year by former Prime Minister Shigeru Ishiba, who resigned in September.
The prospects of a large-scale economic stimulus package as presented today led to a sharp depreciation of the yen and Japanese government bonds since Takaichi took power, who also does not rule out the possibility of currency market intervention.
“Once the supplementary budget is drafted, the amount of bonds issued is expected to be less than last year after its approval, and fiscal sustainability has been fully considered,” she said.
