Japan approves ¥21.3 trillion stimulus package to counter inflation and revive economic momentum

Japan has unveiled one of its largest spending packages in recent years, approving a ¥21.3 trillion (US$135.4 billion) stimulus plan aimed at easing the pressure of elevated living costs and supporting a slowing economy that has struggled through months of weak consumption and soft export demand.

The package, cleared by the Cabinet on Friday, is the first major policy intervention under Prime Minister Sanae Takaichi, who took office last month with a promise to revive growth even as concerns grow around Japan’s already heavy debt load. Speaking after the approval, Takaichi said the measures were designed to “turn anxiety into confidence” and deliver immediate relief for households.

A mix of subsidies and temporary tax cuts sits at the heart of the plan. The government will roll out support to reduce energy bills, cut gasoline taxes, and distribute one-time cash handouts of ¥20,000 per child. Local authorities will also issue rice vouchers and small-value coupons in an attempt to offset rising daily expenses. Core inflation, excluding fresh food, rose 3% in October—above the Bank of Japan’s target.

The decision comes at a time when Japan is also absorbing the impact of higher U.S. tariffs on key exports, a trend that has dragged shipments to the U.S. lower for seven consecutive months. The yen has hovered near its weakest levels of the year, while investors have sold off government bonds on concerns about large-scale fiscal spending.

Takaichi now faces the challenge of securing parliamentary approval for a supplementary budget, a hurdle made more difficult by the ruling coalition’s minority position in both houses of the Diet. While public support for the country’s first female prime minister remains high, opposition lawmakers have questioned whether the stimulus will deliver lasting economic lift or merely offer temporary relief.