Japan unveils 21 trillion yen economic stimulus plan, with over half allocated to inflation relief

In a bid to appease disgruntled voters, Japanese Prime Minister Kishida Fumio's cabinet has approved the largest supplementary spending plan since the pandemic, allocating funds through a comprehensive package to ease tensions. However, this move may raise concerns among investors closely monitoring Japan's fiscal situation, as it has led to the yen falling to a 10-month low and ultra-long government bond yields soaring to historic highs.

The Cabinet Office of Japan stated on Friday that this stimulus plan includes 17.7 trillion yen (approximately $112 billion) in general account spending. These expenditures are likely to be provided through a supplementary budget, marking a 27% increase from the previous year under his predecessor. The overall plan amounts to 21.3 trillion yen, covering measures ranging from price relief to targeted sector investment support.

The substantial scale of funds for price relief underscores Kishida Fumio's determination to address ongoing inflation, a phenomenon that has exacerbated voter dissatisfaction and led to the downfall of his predecessor. Data on Friday showed that Japan's key price index has remained at or above the central bank's 2% target level for 43 consecutive months, marking the longest record since 1992.

The Japanese Cabinet plans to approve a supplementary budget bill on November 28 to provide funding for this plan and aims to secure parliamentary approval by the end of the year.

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