Japanese lawmakers began deliberations on Monday on an 18.3 trillion yen supplementary budget for fiscal 2025, with Prime Minister Sanae Takaichi's expansionary plans fueling worries over fiscal deterioration and driving up long-term interest rates. The government aims to pass the bill by the end of the Diet session on December 17 to fund stimulus measures addressing rising living costs and spurring investment.
Japanese lawmakers on Monday kicked off deliberations in the Diet on an 18.3 trillion yen ($118 billion) supplementary budget for fiscal 2025, the largest since 2022 amid the coronavirus downturn. The government plans to finance over 60 percent, or 11.7 trillion yen, through new bond issuances. Prime Minister Sanae Takaichi's aggressive spending has heightened concerns about Japan's already precarious fiscal health—the worst among advanced economies, with debt exceeding twice the size of GDP—leading to a sell-off in government bonds and a sharp rise in long-term interest rates. The 10-year bond yield reached its highest level since June 2007.
In a speech to the House of Representatives, Finance Minister Satsuki Katayama urged swift passage of the bill, noting weak consumption as wage growth lags behind inflation. "To bring back a strong economy to Japan, we should pass the supplementary budget bill as soon as possible," she said, calling for cooperation from ruling and opposition parties. The economic package "aims to urgently address rising prices to protect living standards and restore the strength of the Japanese economy."
Responding to an opposition lawmaker's concerns over the budget's scale, Takaichi described it as containing only "truly necessary" measures and "strategic fiscal spending." Key relief includes subsidies for electricity and gas bills and cash handouts for households with children. The budget also boosts investment in semiconductors and shipbuilding, sectors Takaichi deems vital for national security, and accelerates defense spending to hit 2 percent of GDP in fiscal 2025, ahead of the previous 2027 target.
The main opposition Constitutional Democratic Party of Japan, along with Komeito—which left its coalition with the Liberal Democratic Party before Takaichi's October inauguration—are considering a proposal to redirect spending toward greater support for low- and middle-income households.