On Friday, November 28, the Japanese Cabinet approved an additional budget of 18.3 trillion yen (approximately $117 billion) for the current fiscal year to support Prime Minister Sanae Takashi’s new round of economic stimulus plan. According to data released by the Ministry of Finance, around 11.7 trillion yen will be raised through issuing new government bonds.
This supplementary budget far exceeds last year’s supplementary budget of around 13.9 trillion yen. The government plans to submit the budget to the parliament in early December and aims to have it passed during the special parliamentary session ending on December 17.
In this additional budget, spending will focus on two main areas. Firstly, to address rising prices, the government has allocated 8.9041 trillion yen, including measures such as subsidies for electricity and natural gas, as well as food support. There is also a tax reduction plan of 2.7 trillion yen, and cash subsidies of 20,000 yen per child will be provided to families with children.
The second part focuses on strengthening national security and promoting strategic growth investment. The government has earmarked 6.433 trillion yen for this purpose, which will be invested in projects identified by the Takashi administration as strategically critical areas, including artificial intelligence (AI) development, semiconductor, and shipbuilding industries.
The budget also allocates 1.656 trillion yen to enhance defense capabilities and diplomacy, with an additional 709.8 billion yen set aside as supplementary reserves.
In terms of funding sources, in addition to the 11.7 trillion yen in new government bonds issued, some expenditure will be offset by higher-than-expected tax revenues. This fiscal year, tax revenues are expected to exceed the original estimate by 2.88 trillion yen, reaching a record high of over 80 trillion yen for the first time. The government will also utilize approximately 1.155 trillion yen in non-tax revenues.
Addressing criticisms of the government’s continued expansion of debt, Prime Minister Sanae Takashi stated that the total government bond issuance for this fiscal year, combining the initial budget and the supplementary budget, is expected to be around 40.3 trillion yen, lower than last year’s 42.1 trillion yen. She emphasized that the government will still prioritize fiscal discipline.
However, critics point out that the slightly lower scale of bond issuance this year compared to last year is because former Prime Minister Isoroku Shige has already compressed the space for new government bond issuance when compiling the initial budget for the 2025 fiscal year.
Analysts believe that due to the Takashi administration’s minority status in both houses of the parliament, the content of this supplementary budget seems to have made multiple compromises among the ruling coalition, opposition parties, local governments, and business demands.
Furthermore, earlier on Friday, the parliament passed a law to abolish the temporary additional tax on gasoline starting from the end of the year, which is expected to reduce energy costs and lighten the burden on households. However, the government has not yet proposed concrete measures to offset the reduction in tax revenue caused by this move. The related revenue reduction (including the additional diesel tax scheduled to be abolished in April next year) is estimated to reduce the total central and local tax revenues by approximately 1.5 trillion yen annually.