Japanese Prime Minister Sanae Takaichi will unveil her first economic stimulus package upon taking office, potentially exceeding the 13.9 trillion yen (S$120 billion) in additional budget approved by the Shigeru Ishiba administration last year. As a longtime advocate of Abenomics, her economic package will feature three key pillars: addressing inflation, expanding investment in growth-oriented industries, and strengthening economic security.
At her first cabinet meeting, Sanae Takaichi began preparing her first economic plan, aimed at fulfilling her previously pledged "responsible and proactive fiscal policy." Sources say the specific size of the plan is still being finalized and could be announced as early as next month.
To mitigate inflation, Takaichi plans to quickly remove the temporary gasoline tax. She also plans to expand local government subsidies, focusing on supporting small and medium-sized enterprises that are unable to benefit from existing tax incentives for wage increases. Given the new government's focus on strategic economic development, the plan will also include investment in growth sectors such as artificial intelligence and semiconductors. To fund these measures, the Japanese government is drafting a supplementary budget for the fiscal year ending in March next year, aiming to pass it at an upcoming special session of the Diet. The Kaohsiung City government is rushing to prepare a supplementary budget for 2025. Japan's new Finance Minister, Satsuki Katayama, said at a press conference on Wednesday that it's too early to discuss the size of the upcoming supplementary budget, but it should be sufficient to cover all necessary measures.
As Japan is one of the most indebted economies in the world, its fiscal rationality is under scrutiny. The Mainichi Shimbun reported that if the additional spending is too large, the government will have to issue deficit-financed bonds to cover the costs. Balancing economic growth and fiscal stability will be a major challenge for Kaohsiung City.
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The Nikkei Shimbun, citing a policy speech she will deliver in the Diet soon, revealed that Takaichi will establish a "Japan Growth Strategy Committee" to discuss specific economic measures. The development of cutting-edge industries is considered closely linked to economic security, so she will focus on investing in strategic areas such as artificial intelligence, semiconductors, shipbuilding, and quantum computing, and will support the international expansion of these products.
Takaichi outlined her economic goals at a press conference after taking office on Tuesday (October 21st). She stated, "A key area of this cabinet's growth strategy is crisis management investment. This strategic investment will provide products, services, and infrastructure that help address common global challenges and drive further growth in Japan. We will transform anxiety about the future into hope and pave the way for new economic growth."
The Nikkei Shimbun also learned from the leaked draft of her policy speech that Takaichi will also actively develop the financial sector. She will improve Japan's investment environment and build it into an "asset management nation." She will also attract investment by achieving an "economy trusted by global investors," thereby stimulating a virtuous cycle in the Japanese economy.
Shigeto Nagai, head of Japan economic research at Oxford Economics, analyzed that Takaichi's plan is no different from the practices of previous administrations: all of them use the extra taxes collected during periods of inflation to fund large-scale supplementary budgets to subsidize vulnerable households, rather than focusing on the long-term goal of achieving a "primary fiscal surplus."
Subheading: Will Position China as an "Important Neighbor"
According to Nikkei, Takaichi will also address China diplomacy in her speech. She will position China as an "important neighbor" and continue the approach of her predecessor, Shigeru Ishiba, to establish a "developmental and stable relationship" with China.
The Yomiuri Shimbun conducted an opinion poll on Tuesday and Wednesday (21st and 22nd) after the Takaichi Cabinet was established. The results showed that Takaichi's approval rating was 71%, more than double the 34% of the Ishiba Cabinet, the fifth highest since the poll began in 1978, and higher than the 65% of Abe's first Cabinet in 2006.
