Takaichi Announces Supplemental Budget

Prime Minister Sanae Takaichi officially announced formulation of FY2026 supplemental budget. The budget is aimed at supporting families and businesses that are suffering from shortage of resources, caused by effective blockade of the Strait of Hormuz. Prolonged war between the United States and Iran forced Takaichi into retracting her policy which would not depend on a supplementary budget.

Takaichi told the press in her official residence on May 25th that her cabinet would submit a supplemental budget bill with 3 trillion yen of fiscal mobilization in the first week of June. She explained that a supplemental budget was necessary for minimizing risk of uncertainty, because the situation in the Middle East was still unpredictable. She insisted that the budget would be endorsed by sufficient financial resources.

 

Takaichi will help people’s payment for electric power and gas for this summer. Deaths of the people with a heatstroke is a serious problem in Japan recent years. To support spendings of each family with 5 thousand yen for three months between July and September, the government will deliver 500 billion yen. Fiscal reserve in annual FY2026 budget, which passed the Diet in April, will be mobilized for the support. These 500 billion yen of spendings will be refilled by the supplemental budget.

 

The government of Japan has been supporting payment for electricity and gas since 2023, when supply of them shrank caused by Russian invasion to Ukraine. It provided 3,340 yen for each family in the summer of 2025. Takaichi hopes to increase this support for electricity and gas by 33 percent for the summer of 2026. The government has also been supporting cost for heating in the winters.

 

Support for electricity and gas is not enough to go through this summer. The supplemental budget includes measures for local communities that use portable liquified petroleum gas, which will be issued to local governments. In the supplemental budget, Takaichi will establish a new reserve for volatile situation in the Middle East. The reserve is supposed to be used for subsidy for gasoline. Although Takaichi has been subsidizing for gasoline to maintain the price of regular gasoline at 170 yen per litter, fiscal resource for the policy will be drained by the end of June. Takaichi hopes to continue it to the end of August.

 

Three trillion yen of supplemental budget will be endorsed by issuance of governmental bonds. Here is Takaichi’s explanation. “It will be offset by reduction of governmental bonds issuance in FY2025, which was caused by unexpected surplus of tax revenue. The supplemental budget can be delivered without affecting bonds market.” She was careful about response of the market to her economic policy.

 

Interest rate of long-term bonds has rose from 1.6 percent in September 2025, just before Takaichi took the seat of prime minister, to 2.7 percent in May 2026. The market is skeptical about Takaichi’s handling of fiscal policy. As Takaichi reiterates that Japan has enough resource, the market may take a sober action, depending on situation of the Middle East in this summer.

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