Japan’s new PM orders major stimulus package to fight inflation

Japan’s newly elected Prime Minister Sanae Takaichi has instructed the development of a new package of economic measures to address the effects of inflation on families and businesses.

Takaichi was elected as Japan’s first female prime minister on Tuesday, October 21. As her first move, she intends to create an economic relief package, but has not specified the exact size of the package or whether additional bonds would need to be issued for funding.

The only thing recently reported was that the prime minister ordered a supplementary budget to support these measures.

Takaichi changes her views to fight inflation in Japan 

While more details of the new package of economic measures are set to be made public later, sources have highlighted that her instruction hints at including subsidies for winter electricity and gas bills, as well as local grants to help ease the burden of rising prices in the package. 

Additionally, analysts have pointed out that the package encourages small and medium-sized firms to raise wages and invest more. 

Interestingly, the order does not mention any cash payment. Regarding this discovery, reliable sources shared an analysis revealing that cash payments received little public approval during the national election campaign held in July. 

After being elected, Takaichi closely examined Japan’s economic status and challenges. Based on her argument, she pointed out the cost-of-living crisis as a key economic concern. This demonstrated her awareness of public worries about inflation. Moreover, her order illustrated that she preferred strategic actions over a wide spending initiative.

Reports also mentioned that the prime minister has a history of advocating for strong monetary and fiscal stimulus. However, it is worth noting that Takaichi recently adjusted her perspective. Now, she promises to focus on fiscal policies that are both growth-oriented and responsible. 

What has triggered her shift in views is the urgency to balance improving the economy with the need to address Japan’s substantial public debt, which has led to an increase in long-term bond yields. 

Japan plans to invest $550 billion in the US in exchange for reduced tariffs

Data shows that consumer inflation has remained at or above the Bank of Japan’s 2% target for over three years. At the same time, the central bank has gradually increased interest rates, which has consequently raised the government’s borrowing cost.

In response to this, Takaichi released a statement on Tuesday this week expressing hope that inflation will be demand-driven as wages hike, rather than being caused by higher costs.

She also pointed out that the upcoming package will focus on enhancing economic security and defense. According to the Prime Minister, the package involves plans to invest in critical areas, such as artificial intelligence and semiconductors, as well as efforts to strengthen supply chains for key products.

It will also respond to the US tariffs by enacting an investment plan already announced with Washington. Therefore, as part of it, Japan plans to spend $550 billion in core areas in the US in exchange for reduced tariffs.

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