Japan parliament enacts US$118 billion extra budget

It funds a 21.3-trillion-yen stimulus announced last month, including energy subsidies, cash handouts and AI incentives

Japan has the biggest ratio of debt to gross domestic product (GDP) among major economies, projected to reach 232.7% this year. PHOTO: EPA

Published Tue, Dec 16, 2025 · 07:28 PM

[TOKYO] Japan’s parliament approved a US$118 billion extra budget on Tuesday (Dec 16) to finance Prime Minister Sanae Takaichi’s massive stimulus package, including anti-inflation measures and a boost to Japan’s military.

The 18.3-trillion-yen budget passed the upper house, in which Takaichi’s ruling coalition does not have a majority but managed to receive support from opposition parties to enact the measure.

As the budget was approved, the prime minister stood up in the chamber and bowed deeply as is tradition on such an occasion.

It is designed to pay for a 21.3-trillion-yen stimulus that Takaichi announced last month, including energy subsidies, cash handouts, and investment incentives in key fields like semiconductors and artificial intelligence.

It also includes expanded spending on defence, as China increases military activities in the wider region.

“We will implement strategic fiscal spending to protect people’s livelihoods and build a strong economy,” Takaichi said last month.

BOJ is set to raise benchmark rates to highest level since 1995

The S&P Global flash Japan Manufacturing Purchasing Managers’ Index (PMI) rose to 49.7 from 48.7 in November, extending a contraction for the sixth straight month.

Japan’s manufacturing sector contracts at slower pace in December: PMI

With inflation exceeding its 2% target for well over three years, a growing number of BOJ board members have signalled their readiness to vote for a rate hike.

Japan business mood hits four-year high, keeps BOJ rate-hike view alive

BOJ gavoernor Kazuo Ueda indicated that the bank is not likely to be done once it has raised rates again as it continues to adjust the level of support for the economy.

BOJ’s Ueda says Japan is getting closer to sustainable inflation

Japan’s main price gauge has remained at or above the BOJ’s 2% target for more than three and a half years.

Japan confirms deeper GDP decline, backing stimulus package

The inflation rate used to calculate the headline real wage indicator includes fresh food prices but not rent costs and it tends to be higher than the core rate.

Japan’s October real wages fall for 10th month despite upbeat nominal pay

The indicator will be among the factors the BOJ will scrutinise in deciding whether to raise interest rates in December or hold off until next year.

Japan October household spending falls at fastest pace in nearly two years

More than 60 per cent of the planned spending will come from new government bonds, rekindling the market’s anxiety about Japan’s fiscal health.

Japan already has the biggest ratio of debt to gross domestic product (GDP) among major economies, projected to reach 232.7 per cent this year, according to the International Monetary Fund.

Under Takaichi’s leadership, Japan’s long-term rates have climbed to the highest level in nearly two decades as investors dumped Japanese government bonds. AFP

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