Takaichi’s Economic Stimulus Plan

Sanae Takaichi Cabinet authorized an economic stimulus plan as a cabinet decision on November 22. The plan includes measures to ease negative impact of price inflation, promoting investments, increasing defense budget and some tax cuts with additional governmental spending of 21.3 trillion yen as a total. It will be the biggest supplementary budget in its size of budgetary spendings, since the end of COVID in 2023.

Takaichi insisted on surpassing total amount of the supplemental budget of Shigeru Ishiba Cabinet in 2024, which was 13.9 trillion yen in the general account of national budget. She accumulated measures for supporting households, as she had been arguing in presidential election of the Liberal Democratic Party (LDP) or her policy speech to the Diet, to 17.7 trillion yen, and the size of stimulus plan including tax cut for gasoline was swollen to 21.3 trillion yen.

 

The plan focuses on helping households with governmental spendings. It provides every family with 7 thousand yen for payment of electricity and gas for between January and March 2026. Considering price hike of rice, it distributes vouchers or coupons that worth 3 thousand yen for every citizen. Those vouchers and coupons will be distributed through local governments.

 

For the families with children going to high school or younger, the national government disseminate 20 thousand yen each. This support for children was requested by Komeito, former coalition partner of the LDP. Takaichi seems to have hoped to get support of Komeito for the budget bill, considering her minority government in both chambers of the Diet.

 

Tax cuts are mainly aimed at appeasing the Democratic Party for the People (DPP), one of the opposition parties which Takaichi attempts to approach. The DPP insists on raising the threshold of taxpayers’ annual income for imposing income tax, as well as abolishment of provisional tax for gasoline that most opposition parties demand. Takaichi appropriates annual 1.2 trillion yen for raising income tax threshold and 1.5 trillion yen for gasoline tax cut.

 

For promotion of “investment for crisis control,” which Takaichi upholds as the core of her growth strategy, the stimulus plan allocated 6.4 trillion yen. 1.7 trillion yen was accumulated to deal with relations with the United States, including additional defense budget with request of President Donald Trump to increase spendings for security and financial support for small and mid-size businesses that would be affected by Trump’s tariff policy.

 

There is a concern that Takaichi’s active spendings may accelerate rice inflation. The fiscal resource for her policy is supposed to be not only surge of tax revenue, but issuance of governmental bonds, which may exacerbate the balance of national budget. It is a fundamental concern for the market that Takaichi’s active spendings ignite further skepticisms against Takaichi’s handling of Japanese economy.

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