Japan’s New PM Takaichi Plans Massive Stimulus to Fight Inflation and Boost Growth
Japan’s new Prime Minister, Sanae Takaichi, is preparing a major economic stimulus package expected to exceed $92 billion, aimed at helping households manage rising inflation, according to government sources familiar with the discussions.
The plan, worth more than 13.9 trillion yen ($92.19 billion), marks Takaichi’s first major fiscal initiative since taking office on Tuesday. A strong advocate of large-scale government spending, Takaichi has pledged what she calls a “responsible proactive fiscal policy.”
According to the sources, the new stimulus will rest on three main pillars — inflation countermeasures, investment in growth industries, and national security. The details are still being finalized, but an official announcement could come as soon as next month.
Japan’s Markets React as Investors Watch Fiscal Moves
Following the report, Japan’s Nikkei 225 reversed earlier losses and turned positive, while the yen gave up morning gains and traded flat. Investors are closely monitoring the package’s scale, given that Japan remains one of the world’s most indebted economies.
As part of her inflation relief measures, Takaichi plans to abolish the provisional gasoline tax rate and increase local government grants, particularly for small and medium-sized enterprises (SMEs) that struggle to benefit from current tax incentives for wage hikes.
The package will also direct significant funding toward strategic growth sectors like artificial intelligence (AI) and semiconductors, reinforcing Japan’s push for long-term economic security and innovation.
To finance the new measures, the government is drafting a supplementary budget for the current fiscal year ending in March. If spending surpasses expectations, deficit-covering bonds may be issued, raising questions about fiscal discipline.
A Return to Abenomics-Inspired Policy
Economists say Takaichi’s approach aligns with her campaign pledges and resembles policies under previous administrations that used tax revenues from inflation to fund large supplementary budgets.
Shigeto Nagai, head of Japan economics at Oxford Economics, said the plan is “consistent with Takaichi’s policy list” and continues Japan’s tradition of supporting households rather than focusing on achieving a primary fiscal surplus.
Takaichi’s election as Japan’s first female prime minister on Tuesday drove the yen and bond yields lower, as investors bet her leadership could delay future Bank of Japan (BOJ) rate hikes.
A long-time supporter of former Prime Minister Shinzo Abe’s Abenomics, Takaichi has called for higher public spending, targeted tax cuts, and stronger government influence over monetary policy. She reiterated that monetary policy decisions rest with the BOJ, but emphasized that overall economic policy remains the government’s responsibility. The next BOJ policy meeting is scheduled for October 29–30.
