Japan Looks to Craft 20 Trillion Yen Stimulus Package

The Japanese government is looking to compile an economic package worth more than 20 trillion yen ($129 billion) to ease the burden of rising living costs, a source close to the matter said, Kyodo News reported.

Japan’s economy shrank for the first time in six quarters during the three months ending in September, as consumer spending slowed amid rising prices.

As part of efforts to counter persistent inflation, the central government plans to set aside 2 trillion yen for subsidies to local governments, which can use the funds at their discretion, and allocate about 400 billion yen for a cash handout of 20,000 yen per child, according to the source.

The stimulus measures, backed by a supplementary budget for the year ending March 2026, are expected to be approved by Prime Minister Sanae Takaichi’s Cabinet soon.

The measures will also include a gasoline tax cut, which ruling and opposition parties recently agreed to, Mainichi Japan also reported.

The extra budget is expected to reach 17 trillion yen, well above last year’s 13.9 trillion yen.

Japan’s economy shrank for the first time in six quarters during the three months ending in September, as consumer spending slowed amid rising prices.

Takaichi has pledged to prop up Japan’s inflation-plagued economy with aggressive fiscal spending.

In financial markets, investors have expressed concern about the impact of her economic policy on Japan’s fiscal health, prompting a sell-off of the yen and government bonds in recent trading.

As of 2023, Japan’s debt-to-gross domestic product ratio stood at 240 percent.