Japan’s populist debt-fuelled spending plan alarms economists

With the yen already weak, experts fear the massive borrowing scheme will drive up import costs for everything from food to fuel

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A man looks at a board displaying stock prices on the Tokyo Stock Exchange last month. Photo: AFP

Published: 3:00pm, 26 Nov 2025Updated: 7:22am, 27 Nov 2025

Japanese Prime Minister Sanae Takaichi defended her 21.3 trillion yen (US$136.5 billion) stimulus package in parliament on Wednesday, telling opposition politicians the debt-fuelled plan was “necessary” amid concerns over the yen’s slide and Japan’s worsening financial health.

Takaichi’s cabinet signed off on the 21.3 trillion yen (US$136.5 billion) package on Friday, including 17.7 trillion yen in fresh spending – the largest stimulus since the pandemic and her first major economic gambit since taking office.

Cash handouts and subsidies form the core of the package, aimed at voters battered by inflation that has outpaced wage growth.

Headline measures include one-off payments to families of 20,000 yen per child, extended subsidies for winter power bills and local measures such as vouchers for rice and coupons for electricity.

Economists seem to be unanimously not in favour of this plan

Martin Schulz, policy economist

Fuel subsidies and personal tax relief are a key demand of the ruling Liberal Democratic Party’s new coalition partner, the Japan Innovation Party. But how to fund the spending pledges remains unresolved.

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