The Takaichi cabinet approved a 21.3 trillion yen (US$136.25 billion) stimulus package on Friday (November 21) that includes a 17.7 trillion yen ($113.21 billion) supplemental budget. The latter will be submitted to the Diet for passage this session.
The total amount, including loan guarantees and other non-budgetary measures, will be 42.8 trillion ($273.77 billion). This amounts to the largest stimulus package since the Covid-19 pandemic. (Takaichi’s press conference is here.)
This stimulus package was structured around three priorities, including measures to provide relief from the rising cost of living; “strategic investments” in high-priority sectors, including shipbuilding, artificial intelligence (AI), and semiconductors; and an increase in defense spending to bring total defense expenditures for FY2025 to 2% of GDP.
As Nikkei reports, the stimulus package steadily grew in size as the Takaichi government rejected the finance ministry’s initial draft and pushed for a larger budget in coordination with both ruling and opposition parties, ratcheting up the headline number as additional tax reductions and subsidies were included in the package.
In her remarks announcing the budget, Prime Minister Sanae Takaichi sought to reassure markets that her government is serious when it says it is pursuing responsible fiscal expansion, noting, for example, that the overall amount of debt issuance in FY2025 will be lower than in FY2024.
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Nevertheless, as the government heads into the final stages of preparing the FY2026 budget, it will be engaged in a constant dialogue with markets, trying to reassure investors that she still recognizes the importance of fiscal sustainability in some form and that her policies will not be inflationary (and detrimental for the yen’s value against the dollar and other major currencies).
LDP and Ishin search for consensus on seat reductions
LDP and Ishin no Kai officials discuss how to advance legislation to reduce the number of seats in the House of Representatives on November 21, 2025 Source: @osaka_ishin on X
In a meeting of Liberal Democratic Party (LDP) and Ishin no Kai policy officials on November 21, the parties reportedly agreed that they will aim to pass a bill that outlines a broad framework for reducing the number of seats in the lower house, serving as a precursor to a broader debate with opposition parties on electoral reform in the spring.
However, while Ishin no Kai has tacitly conceded that passing a bill to reduce the number of seats in the House of Representatives could be more prolonged than initially anticipated, the party does not seem entirely satisfied with the LDP’s preference for drawing out the process and keeping legislation ambiguous.
While Ishin no Kai co-leader Yoshimura Hirofumi expressed satisfaction with the talks with the LDP, he has stressed that it wants the two parties to be concrete about the number of seats to be reduced and the timeline for implementation.
While it still seems unlikely that the partnership will break on this issue, it is not impossible that Ishin no Kai, frustrated with the LDP’s cautious approach to reform, could part ways sooner rather than later.
Meanwhile, the main opposition parties, which have been decidedly skeptical about the plan to reduce the number of seats, reacted coolly to the LDP-Ishin plan, though Democratic Party for the People (DPFP) Tamaki Yūichirō has expressed his interest in possibly co-sponsoring legislation to reduce the number of seats.
Tokyo and Beijing remain at oddsIn the latest sign of the deepening chill in the Japan-China relationship, Beijing has suspended bilateral talks aimed at resuming Japan’s beef exports to China, suspended since 2001 due to concerns about beef contaminated with bovine spongiform encephalopathy (BSE), also known as mad cow disease.
The Chinese government stressed on November 21 that its condition for pursuing a “strategic, mutually beneficial partnership” – which Takaichi said Friday remains her goal for the bilateral relationship – is for the prime minister to retract her remarks about Japan’s participation in responding to a Taiwan contingency.
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While not a retraction, Chief Cabinet Secretary Kihara Minoru said Friday that the prime minister will avoid speaking “hypothetically” about a Taiwan contingency in the future to avoid “inviting confusion.”
Further readingOne month into her tenure, Takaichi has generally not used her evenings for working dinners.
The LDP is still stuck between unwinding electoral coordination with Kōmeitō while adapting to a partnership with Ishin that does not include electoral coordination.
The Takaichi government is satisfied with Niigata Governor Hanazumi Hideyo’s approval for restarting the Kashiwazaki-Kariwa nuclear power plant.
With the yen still weakening, Finance Minister Katayama Satsuki told reporters Friday that the government is “naturally” contemplating intervention to reverse the currency’s slide.
On Takaichi’s unusually stable approval ratings.
The Takaichi government continues to face anxiety about a “Truss shock”-like scenario.
Longtime Japan politics and policymaking analyst Tobias Harris heads Japan Foresight LLC. This article was originally published on his Observing Japan Substack newsletter and is republished with permission. Become a subscriber here.
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