Japan’s PM vows to break with ‘fiscal austerity’
Japanese Prime Minister Sanae Takaichi underlined his administration’s determination to revive the economy, pledging to abandon “excessive fiscal austerity” and boost long-term investment.
He also promised to set specific indicators to measure progress in getting the country’s finances in order, in a nod to growing market concerns about Japan’s worsening financial situation.
Takaichi’s remarks underscore a key financial risk: The flagship spending plan must stimulate the world’s fourth-largest economy without triggering debt surges that could lead to a new slide in the yen and government bonds.
In his policy speech to parliament on Friday, Takaichi reiterated his determination to pursue “responsible, proactive” fiscal policy” aimed at boosting investment in areas such as artificial intelligence, chips and shipbuilding to support Japan’s potential growth.
“My administration will break the long-standing trend of excessive fiscal austerity and chronic underinvestment for the future,” Takaichi said, adding that Japan should not hesitate to increase spending to support private investment.
Takaichi, known as an advocate of loose fiscal and monetary policy, led the ruling party to a landslide victory in the general election on February 8 with promises to increase spending and suspend the consumption tax on food for two years.
Calls for big spending and tax cuts led to a sell-off in government bonds and the yen in late 2025 as investors worried about how Japan, which is saddled with the highest debt burden in the developed world, would finance its big spending plans.
Takaichi said his administration would overhaul the way state budgets are prepared, such as promoting multi-year budgets and long-term investment funds, to make government initiatives more predictable for firms.
In Japan, the government sets single-year budgets in which expenditures are allocated to one year rather than spread over several years to ensure that expenditures are scrutinized by parliament.
“We will manage crisis management and growth investments that provide returns exceeding the cost of investment and contribute to GDP growth, under a separate, multi-annual budget framework,” he said.
“At the same time, we will not adopt reckless fiscal policies that would undermine market confidence,” he said, pledging to raise revenue through cuts to some existing subsidies.
The government will also keep the debt growth rate within the economic growth rate and steadily reduce Japan’s debt/GDP ratio to ensure fiscal sustainability, he said, adding that it will set specific indicators to measure progress.
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