Japanese prime minister stresses 'responsible active fiscal policy' in Yomiuri interview

New government bond issuance to be kept around 40 trillion yen; extra budgets reserved for emergencies only

Japanese Prime Minister Takaichi Sanae [AFP]
Japanese Prime Minister Takaichi Sanae [AFP]

Japanese Prime Minister Takaichi Sanae, who has pursued an expansionary fiscal stance, said Friday she would simultaneously work toward fiscal consolidation by minimizing the use of supplementary budgets.

In an interview published in the Yomiuri Shimbun that day, Takaichi said she intended to move away from a fiscal management style that has relied heavily on supplementary budgets, limiting their use to genuinely urgent matters.

She said that while general expenditures rose in the fiscal 2025 supplementary budget compiled after she took office, higher-than-expected tax revenues allowed her to hold new government bond issuance to about 40 trillion yen ($251 billion) — below the previous year's level — even after the supplementary budget was passed.

Takaichi then said she would keep new bond issuance at a similar level going forward.

Since taking office, Takaichi has pursued an expansionary fiscal policy, including increased defense spending and large-scale budget allocations to growth sectors.

Those moves have deepened market concerns that Japan's fiscal health — already burdened by a high debt-to-GDP ratio — could deteriorate further, with side effects including rising long-term interest rates and a weaker yen.

Takaichi's emphasis on fiscal soundness in the interview is widely read as an effort to reaffirm her principle of "responsible active fiscal policy" and ease market anxiety.

On concerns about her signature tax-cut plan to reduce the consumption tax rate on food from the current 8 percent to 1 percent for two years starting next April, Takaichi doubled down, saying lower food prices were essential and that she herself was "a person with a life to live before being a politician."

She also said it was her longstanding view that "there is a need to build in advance a system that allows flexible changes to the consumption tax rate — as Europe did during the COVID-19 pandemic — when a rapid spread of infectious disease or a large-scale disaster occurs."

On a cabinet reshuffle and Liberal Democratic Party personnel changes being coordinated for mid-to-late next month, Takaichi said she would "carefully examine expertise and other factors."

The Yomiuri said she has been reaching out directly by email to lawmakers who have recently stood out in parliamentary activities, signaling she is actively scouting candidates.

The cabinet and LDP personnel decisions that followed the launch of the Takaichi administration were heavily influenced by LDP Vice President Aso Taro, who played a kingmaker role in Takaichi's election as LDP leader last October when her intraparty base was weak.

The key question surrounding this round of appointments is whether Takaichi will be able to put her own stamp on the lineup.

The Yomiuri noted that having delivered a landslide LDP victory in the lower house election last February, Takaichi appears determined to use this reshuffle to more clearly assert her own political identity.


mokiya@heraldcorp.com