Japan’s Upper House on December 16 approved a supplementary budget for fiscal 2025, marking the first extra budget compiled under the Sanae Takaichi administration, which has pledged to pursue a “responsible, active fiscal policy.” The package is designed primarily to help households and businesses cope with persistently high prices.
The supplementary budget’s general account totals 18.3 trillion yen ($118.2 billion), significantly exceeding the 13.9 trillion yen allocated in the extra budget for fiscal 2024. Part of the funding will come from increased tax revenues, while the remaining 11.6 trillion yen will be covered through newly issued government bonds, highlighting continued reliance on debt financing.
Passed earlier by the Lower House on December 11, the budget underpins a broader economic stimulus package focused on inflation relief. Of the total, about 8.9 trillion yen is earmarked for measures to counter rising prices. This includes 500 billion yen in subsidies for electricity and gas bills from January to March next year, aimed at easing household energy costs during the winter months.
Additional spending includes 400 billion yen for direct support to families, providing a 20,000-yen handout per child, and 2 trillion yen in targeted local grants. Within this, 400 billion yen is allocated specifically to address soaring food prices, reflecting growing pressure on household budgets.
Beyond inflation measures, the supplementary budget allocates 6.4 trillion yen for crisis management and growth-oriented investments, 1.6 trillion yen to bolster defense and diplomatic capabilities, and 700 billion yen in reserve funds. However, the expanded scale of the budget has intensified concerns about Japan’s already strained public finances, with long-term interest rates trending upward in financial markets.
As the year draws to a close, the government is now accelerating work on the initial budget for the next fiscal year, with its size and priorities closely watched by investors. “In compiling next fiscal year’s budget as well, we will widen the pie of the Japanese economy,” Prime Minister Takaichi said, adding that the government aims to ensure wage growth outpaces inflation and that its benefits reach as many people as possible. She also pledged to strengthen confidence among market participants.
