Japan approves $135B stimulus to bolster economy, ease prices

Japan’s Cabinet in Tokyo on Friday approved a 21.3 trillion yen ($135.4 billion) stimulus package aimed at lifting growth and easing price pressures. The plan includes energy subsidies, a cut in the gasoline tax and one-time cash payments of 20,000 yen per child. Funding requires a supplementary budget the minority government wants enacted by year-end with opposition support.

Prime Minister Sanae Takaichi, in office since last month, presented the package as swift relief for households and a boost to demand through higher public spending. “Through wise spending, we will change worries into hope and achieve a strong economy,” Takaichi told reporters. “What we should do now is to strengthen the national power through expansionary spending, through wise spending, and not to cause harm through excessively contractionary policies.”

Measures include subsidies to reduce electricity and gas bills, a temporary gasoline tax cut, and local coupons such as rice vouchers worth 3,000 yen per person. The child payments would cost about 400 billion yen ($2.6 billion). Officials also framed the plan as a buffer against the impact of higher U.S. tariffs on Japanese exports.

According to Cabinet Office estimates, the stimulus could add 24 trillion yen ($155 billion) to gross domestic product, or about a 1.4% annualized lift. Japan’s economy shrank at a 1.8% annual rate in the July–September quarter. Core inflation, which excludes volatile food prices, stood at 1.43% in October. The central bank targets around 2%.

Markets have been unsettled. Yields on Japanese government bonds rose this week as investors sold debt, the yen weakened to near its lowest level of the year, and the Nikkei 225 fell 2.4% on Friday on heavy selling in technology shares.

Trade figures highlighted soft demand from the United States. Exports to the U.S. fell in October for a seventh straight month. Shipments to other markets rose 3.7%, helped by stronger sales to Asian economies. Officials pointed to U.S. tariff policy as a drag on exports.

Opposition lawmakers and several economists questioned how much the measures will reduce consumer prices beyond the near term, noting that broad stimulus can lift demand even as energy relief lowers some costs. The administration described the goal as cushioning households while supporting a recovery in output and incomes.

Takaichi took over from Shigeru Ishiba after election losses tied to frustration over rising prices and weak wage gains. She is Japan’s first female prime minister and has pledged more forceful fiscal action even as public debt is roughly three times the size of the economy.

The government wants quick implementation once the budget passes. The plan covers household support, energy cost relief and steps to counter external headwinds, with local governments expected to distribute coupons and other targeted aid.

Tensions with China have resurfaced after remarks from Takaichi drew criticism in Beijing. Chinese authorities issued an advisory discouraging travel and study in Japan, pressuring shares exposed to cross-border activity.

Defending the strategy, Takaichi cast the fiscal expansion as a way to stabilize conditions while longer-term efforts to repair public finances continue. She emphasized a focus on “wise spending” and pledged to monitor prices and market developments.

As we reported earlier, Japan’s Financial Services Agency plans to reclassify cryptocurrencies as financial products under the Financial Instruments and Exchange Act, bringing roughly 105 tokens already cleared for domestic exchange listing under insider-trading rules and prospectus-style disclosures. The plan includes exploring a flat 20% capital-gains tax on those assets, replacing the current “miscellaneous income” treatment that can reach effective rates above 50%, and would require Diet approval, with a bill targeted for submission in 2026. Regulators are also studying limited bank participation, including whether lenders can hold crypto and operate licensed exchanges.