Japan’s New PM Plans Major Economic Stimulus to Combat Inflation: Sources
Japan’s newly appointed Prime Minister, Sanae Takaichi, is set to introduce a significant economic stimulus package. This initiative aims to support households battling rising inflation and is expected to exceed last year’s $92 billion efforts.
Overview of the Economic Stimulus Package
Estimated at over 13.9 trillion yen (approximately $92.19 billion), this package marks Takaichi’s first major economic action since taking office on October 21, 2025. Her approach emphasizes what she describes as a “responsible proactive fiscal policy.”
Main Pillars of the Package
- Measures to combat inflation
- Investments in growth industries
- Strengthening national security
Sources suggest the specifics of the package are still being finalized, and an announcement could occur as soon as next month.
Fiscal Measures and Investments
Among its key components, the plan includes eliminating the temporary gasoline tax to provide immediate relief. Additionally, Takaichi’s administration intends to enhance local government grants, particularly aiding small and medium enterprises that currently cannot access tax incentives for wage increases.
The proposed investments will also target growth sectors such as artificial intelligence and semiconductors, emphasizing Japan’s strategic economic development.
Supply and Funding Strategies
Finance Minister Satsuki Katayama indicated that while the exact size of the additional budget is yet to be disclosed, it would need to be substantial to implement all necessary measures. The government is preparing a supplementary budget for the current financial year, anticipating its presentation during an upcoming extraordinary parliamentary session.
If the new spending surpasses expectations, Japan may resort to issuing deficit-covering bonds, which raises concerns about balancing economic growth with fiscal prudence.
Political Context and Implications
Shigeto Nagai, head of Japan economics at Oxford Economics, noted that Takaichi’s plans align with her campaign commitments. He remarked that her approach closely mirrors previous administrations that have relied on supplementary budgets funded by increased tax revenue from inflation, instead of focusing on achieving a primary fiscal surplus.
Takaichi is not only the first female prime minister of Japan, but she is also a strong proponent of the late Prime Minister Shinzo Abe’s “Abenomics” strategies. She advocates for increased government spending and tax cuts, while also seeking to regain government influence over the central bank.
This new fiscal initiative is under careful scrutiny, especially as it could affect the Bank of Japan’s monetary policy, with its next meeting scheduled for October 29-30.
