Economic Stimulus Plan Passes Lower House

The FY2025 supplemental budget bill passed the House of Representative on December 11th and it was sent to the Upper House. The Democratic Party for the People (DPP), an opposition party that takes a stance relatively close to the leading parties, and former coalition partner of the Liberal Democratic Party, Komeito, voted for the bill. It is likely that the bill will be enacted within current session of the Diet, which is closing December 17th. Prime Minister Sanae Takaichi, with her minority government, is making a major achievement to stabilize her administration.

Since she was elected PM in early October, Takaichi has been reiterated her ambition to make a “strong economy” of Japan. Her first attempt for the agenda was the supplemental budget bill with size of 18.3 trillion yen, which included her economic stimulus plan. The budget includes financial support for payment of households in gas or electricity, routine investment on building infrastructure and additional spendings on defense to implement the pledge for 2 percent target of Japan’s GDP.

 

Although the leading coalition by LDP and Japan Innovation Party (JIP) have secured simple majority (233 seats) with joining of three independent lawmakers in the Lower House, they still do not have a majority in the Upper House. While the Lower House has a superior power to the Upper House in approval of a budget bill, it was concerned that the bill cannot pass the Upper House by the end of current session, if the opposition parties intensively delay the procedure.

 

It was DPP that offered a helping hand. The party announced that it would vote for the budget bill, because it included some policies which the DPP can support, such as gasoline tax cut or reform of compulsory automobile liability insurance. “We could see a positive attitude of Takaichi administration,” said DPP leader, Yuichiro Tamaki. DPP had been the first target for Takaichi to form a leading coalition, before she asked it to JIP.

 

Former coalition partner, Komeito, also voted yes to the budget bill. Although the party departed the coalition with the LDP, frustrated with Takaichi’s handling of politics, it positively evaluated the supplemental budget bill which included additional support for families with children. Takaichi included some policies in the budget bill for achieving approval from opposition parties.

 

A budget bill is always a comprehensive basis for an administration to promote its political agenda. If the administration does not have power to push its policies, it needs to make compromises to the opposition parties. Takaichi’s predecessor, Shigeru Ishiba, was forced to do that in FY2025 main budget earlier this year. The passage of FY2025 supplemental budget will be an example for Takaichi to deal with her minority government.

 

The biggest opposition party, Constitutional Democratic Party of Japan, still criticizes the supplemental budget as too big to maintain budgetary discipline. A great amount of issuance of new governmental bonds in the budget causes some concerns in the market. An opposition lawmaker warned Takaichi to take close look at long-term interest, which is at a level of historical high. Dialogue with market is another issue for Takaichi administration.

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