Analysis of Japan's Takaichi Cabinet $135bn Economic Stimulus Package (2025)

Japan’s Takaichi cabinet launched a ¥21.3tn ($135bn) economic package on November 21, 2025, marking its first major fiscal initiative. The package is split into two core components: ¥11.7tn for household relief (energy subsidies, rice vouchers, child benefits, and ¥2.7tn tax cuts) and ¥7.2tn for strategic growth in semiconductors, AI, shipbuilding, and space development [2,3,5]. This is the largest post-pandemic stimulus, exceeding 2024’s ¥13.9tn package [3,5].

• The package balances short-term inflation relief with long-term technological competitiveness, aligning with Japan’s response to U.S.-China tech rivalry [2].
• Defense/diplomacy allocations (¥1.7tn) signal a shift toward national security priorities [5].
• The fiscal expansion marks a departure from previous austerity measures, framing itself as “responsible proactive policy” [2,5].

• Risks
  : Japan’s high public debt-to-GDP ratio (~260% in 2025) raises sustainability concerns [3,5]. Bond yields may climb due to increased borrowing [2].
• Opportunities
  : Strategic sectors like semiconductors and AI could attract private investment, boosting innovation [2]. Household relief may stimulate consumer spending [5].

The package addresses dual challenges: inflation (consumer prices up ~3% in 2025) and stagnant productivity [3]. Implementation details (timelines, sector-specific allocations) remain unclear, requiring further monitoring.