Japan’s new Prime Minister, Sanae Takaichi, is set to unveil an economic stimulus package exceeding last year’s ¥13.9 trillion ($92 billion) to help households cope with inflation and strengthen key industries, government sources said on Wednesday.
The move marks Takaichi’s first major policy initiative since becoming Japan’s first female prime minister on Tuesday and reflects her long-standing support for bold fiscal spending under what she describes as a “responsible proactive fiscal policy.”
According to the sources, the package will focus on three main pillars tackling inflation, investing in growth sectors such as artificial intelligence and semiconductors, and bolstering national security. The plan, which could be announced as early as next month, is still being finalised.
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As part of its inflation-relief measures, the Takaichi administration is expected to abolish the provisional gasoline tax rate and expand local government grants to support small and medium-sized businesses that have struggled to benefit from wage hike incentives.
The new finance minister, Satsuki Katayama, said the forthcoming supplementary budget would be “of sufficient scale” to fund all the planned measures. The government aims to pass the extra budget during the upcoming extraordinary parliamentary session.
Economists say the package underscores Takaichi’s alignment with the late Prime Minister Shinzo Abe’s “Abenomics” agenda of fiscal stimulus and government-led economic management. Analysts, however, warn that further spending could heighten Japan’s already severe debt burden and delay efforts to achieve a primary fiscal surplus.
“The plan is consistent with Takaichi’s campaign promises,” said Shigeto Nagai, head of Japan economics at Oxford Economics. “It reflects the same approach of using tax revenues from inflation to fund supplementary budgets that support households, rather than tightening fiscal policy.”
Takaichi, a vocal advocate of tax cuts and government intervention, has also signalled a desire to reassert political oversight of monetary policy. While affirming that the Bank of Japan will independently determine specific measures, she noted that monetary policy “forms part of the broader economic framework for which the government holds ultimate responsibility.”
Financial markets reacted cautiously to the news. The Nikkei index reversed early losses and closed higher on Wednesday, while the yen stabilised after initial fluctuations, as investors weighed the implications of another round of large-scale fiscal spending on Japan’s monetary outlook.
