21.3 trillion yen! Japan rolls out its largest economic stimulus plan after the epidemic to fully address inflation pressures.

Japanese Prime Minister Sanae Takichi's cabinet has approved the largest round of additional spending since the outbreak of the COVID-19 pandemic, responding to voter demands by injecting funds, but this move may raise concerns among investors about Japan's fiscal situation. The Japanese Cabinet Office revealed on Friday that the stimulus plan includes 17.7 trillion yen (approximately 112 billion US dollars) in general account expenditures, with funds likely to be raised through supplementary budgeting, a 27% increase from the previous year's scale. The total size of the plan is 21.3 trillion yen (approximately 135.4 billion US dollars), with key measures focusing on price relief. "We have formulated this plan to protect people's livelihoods, especially to respond quickly to inflation issues," Sanae Takichi stated after the details of the measures were announced. The largest part of the plan will be used for price relief, totaling 11.7 trillion yen. This includes: providing 7,000 yen in gas and electricity subsidies to each household over the next three months until March of next year; one-time cash assistance of 20,000 yen to each child; and allocating 2 trillion yen for assistance to local regions. "The initial budget size was already significant, but the final outcome reflects the bargaining process unique to the minority government - they had to incorporate the cooperation demands of the opposition parties," pointed out Saori Tsuiki, Senior Economist at Mizuho Research Institute, "If the scale expansion sends unexpected signals to the markets or overseas, further exacerbating the risk of yen depreciation, the expected economic benefits of this plan may be discounted." This large-scale funding for price relief underscores Sanae Takichi's determination to address ongoing inflation. Inflation issues have sparked strong dissatisfaction among voters and were one of the key reasons for the downfall of her predecessor. Data released on Friday showed that Japan's core consumer price index has remained above the Bank of Japan's 2% target level for 43 consecutive months, the longest streak since 1992. Other anti-inflation measures include earmarking approximately 1 trillion yen to cancel gasoline taxes (a measure initially proposed by opposition parties such as the Liberal Democratic Party's new governing partner, the "Japan Restoration Association"); and raising the threshold for personal income tax - another idea initially from an opposition party - involving a cost of 1.2 trillion yen. According to estimates from the Japanese Cabinet Office, these price measures are expected to average a 0.7 percentage point reduction in overall price indicators between February and April next year. The plan also includes 1.7 trillion yen for strengthening defense and diplomatic capabilities, with 1.1 trillion yen helping Japan to increase defense spending to 2% of the Gross Domestic Product (GDP) this fiscal year - a target that Sanae Takichi had already brought forward by two years. Another 7.2 trillion yen will be allocated for crisis management investments. Sanae Takichi has also set aside 700 billion yen as a reserve fund to deal with losses caused by natural disasters and bear damage. Domestic polls in Japan show that support for the Sanae Takichi cabinet remains high. A survey conducted last weekend showed her approval rating rising by 8.8 percentage points to 67.5%, with a majority of respondents expressing optimism about her economic plans. According to sources, Japan's government debt issuance this time may exceed last year's level. Concerns about rising debt have led to a rise in the yield of 5-year and 10-year Japanese government bonds to their highest levels since 2008 earlier this week, with long-term bond yields rising further. The yen against the US dollar rate dropped below the 157 mark, hitting its lowest level since January, prompting senior Japanese officials to issue verbal warnings. "Clearly, pressures on expenditures related to social security, interest payments, and defense will continue to increase in the coming period," said Rain Yin, Sovereign Ratings Analyst at S&P Global, "However, our sovereign rating for Japan has already taken into account its long-standing fiscal imbalances and extremely high government debt burden, so any marginal deterioration is unlikely to result in a significant downgrade in the rating." Sanae Takichi stated that the total amount of new government debt issuance for this fiscal year is expected to be lower than the previous year's level of 42.1 trillion yen. Combined with the initial annual budget, the total amount of bonds planned to be issued in Japan's fiscal year will be reduced by about 20% from last year. "We have also fully considered fiscal sustainability," emphasized Sanae Takichi. The government estimates that if the measures take effect within three years, this stimulus plan will increase Japan's GDP by an average annualized growth of around 1.4 percentage points. It was reported that the Japanese economy contracted for the first time in six quarters in the July-September quarter, partly due to the impact of US tariff policies. As a result, the economic plan promises to strengthen the financial foundations of the Japan Bank for International Cooperation (JBIC) and the N...