World News
Japan considers record ¥120 trillion budget as PM Sanae Takaichi pushes spending to curb inflation
Japan is weighing a record ¥120 trillion budget for FY2026 as Prime Minister Sanae Takaichi ramps up spending to counter inflation, despite mounting debt concerns.
Japan’s government is considering its largest-ever initial budget of more than 120 trillion yen (approximately USD 775 billion) for the next fiscal year, according to Kyodo News, underscoring Prime Minister Sanae Takaichi’s push for aggressive spending to shield the economy from rising prices.
If approved, the proposal would surpass the previous record initial budget of 115.2 trillion yen, which was cleared under former prime minister Shigeru Ishiba for fiscal 2025.
The increase is being driven largely by higher personnel costs and other fixed expenditures as inflation continues to weigh on households and businesses, even as concerns mount over Japan’s already strained public finances.
For fiscal 2026, which begins in April, debt-related spending — including interest payments and bond redemptions — is expected to hit another record, exceeding 28.2 trillion yen, Kyodo News reported. Japan already carries the highest public debt burden among advanced economies.
Earlier this week, parliament approved an 18.3 trillion yen supplementary budget for fiscal 2025 to fund Takaichi’s expansionary economic package aimed at easing the impact of rising living costs. The bill cleared the upper house just before the current parliamentary session ended, after passing the lower house last week.
Although the ruling coalition led by Takaichi’s Liberal Democratic Party lacks a majority in the upper chamber, the package won support from some opposition parties, including the Democratic Party for the People, after the government agreed to incorporate parts of their demands related to relief measures.
Branded under the theme of “responsible and proactive public finances,” the stimulus package is the largest since fiscal 2022, when Japan ramped up spending during the COVID-19 pandemic. It focuses on mitigating inflationary pressures while encouraging investment to revive economic growth.
Despite an anticipated 2.9 trillion yen increase in tax revenue, the government plans to raise 11.7 trillion yen through fresh bond issuance, covering more than 60 per cent of the supplementary package.
Financial markets have reacted cautiously, with both the yen and Japanese government bonds facing selling pressure in recent days, pushing long-term interest rates higher.
To support households, the government has earmarked 8.9 trillion yen for relief measures, including electricity and gas subsidies for the first three months of next year, cash handouts for families with children, and enhanced financial assistance for local governments.
An additional 6.4 trillion yen has been allocated for investments tied to crisis management and long-term growth, aligning with Takaichi’s vision of building a “strong economy.”
The supplementary budget also includes 1.7 trillion yen for security and diplomacy, enabling Japan to meet its goal of raising defence-related spending to 2 per cent of GDP in fiscal 2025 — two years ahead of the original schedule.
