Japanese Prime Minister Sanae Takaichi said on Monday she plans to set a new multi-year fiscal target, signalling a move away from strict annual budget discipline and a focus on flexible spending to stimulate economic growth.
Takaichi did not rule out a future cut to Japan’s sales tax, reinforcing expectations that her administration will prioritise reflation over immediate fiscal consolidation. “We’ll ensure to maintain market trust in Japan’s sustainable finances. But unless we boost investment, the economy won’t grow,” she told parliament.
The remarks mark a departure from previous administrations that emphasised annual fiscal targets to maintain confidence in Japan’s finances, even while deploying large stimulus packages. Analysts warned that new spending initiatives could jeopardise Japan’s goal, set in June, of achieving a primary budget surplus by fiscal 2025‑2026.
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Takaichi said her cabinet will begin work in January on a fiscal target measured over several years rather than annually. She criticised the current primary budget balance as misaligned with global standards and limiting Japan’s ability to use fiscal tools to boost growth.
The shift toward expansionary policy could complicate the Bank of Japan’s decisions on resuming its paused rate-hike cycle, as policymakers weigh the impact of higher U.S. tariffs and domestic economic pressures.
Japan currently carries public debt roughly twice the size of its economy, the highest among major nations, raising concerns over funding costs if the BOJ proceeds with tighter monetary policy.
