Nov. 21 (UPI) — The cabinet of Japanese Prime Minister Sanae Takaichi approved $112 billion worth of measures to stimulate the economy on Friday, the largest such package since the COVID-19 pandemic.
The boost to the so-called “general account,” up from the 2024 fiscal year’s $88 billion supplementary budget, was aimed a easing cost-of-living pressures, including inflation-combatting measures such as rice and shopping stamps.
Adding $17.1 billion in tax cuts from abolishing a gasoline sales tax surcharge and raising the income threshold at which people begin to pay tax, brings the overall value of the package to $134.8 billion.
The figure grows to a projected $270.8 billion when local government and private sector spending is factored in.
The sheer scale triggered jitters in markets this week, sending the cost of Japanese government borrowing higher as investors sold off government bonds and the yen on fears over the worsening state of the public finances.
Takaichi, who is banking on the measures helping not just in the now but boosting long-term economic growth, insisted the package was viable, despite Japan having a debt mountain that is more than twice the size of its economy.
Speaking to reporters, she said it was in keeping with the “sustainability of the public finances.”
“We will not aimlessly pursue expansionary spending,” she said.
The Cabinet Office said the package would boost annual GDP by 1.4% and shave 0.7% off consumer prices.
However, lawmakers will need to agree to fund it with the government banking on getting a supplementary budget proposal through the Diet by Dec. 31.
The largest chunk of the money was earmarked to protect jobs and mitigate high prices, with $40.5 billion being invested in crisis management and $10.8 billion into boosting defense and diplomacy.
The plan also commits $12.7 billion for grants for local municipalities to fund their own programs, $5.1 billion of which is ringfenced to fund support worth around $19 per person via food and premium shopping vouchers and cash handouts to families of $126.50 for each child in the household.
Another $3.2 billion is to cover the cost of a $44.30 per household gas and electricity subsidy to be paid across the first three months of 2026..
AloJapan.com