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What happened
Japan's cabinet approved a significant ¥21.3 trillion ($135.40 billion) economic stimulus package on November 21, 2025. This marks the first major policy initiative under Prime Minister Sanae Takaichi, who aims to implement expansionary fiscal measures. The package includes ¥17.7 trillion in general account outlays and ¥2.7 trillion in tax cuts, surpassing last year's ¥13.9 trillion. However, concerns about Japan's worsening fiscal position have led to a decline in the yen and record-high government bond yields. Takaichi stated that funding will come from higher-than-expected tax revenues and non-tax income, with any shortfall covered by issuing additional government bonds. The final amount of bond issuance is still being determined but is expected to exceed last year's ¥6.69 trillion. A supplementary budget to fund the package is anticipated to be approved by November 28, with parliamentary approval sought by year-end.
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Key insights
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1
Largest Stimulus Since COVID
The new package is the biggest economic stimulus since the pandemic.
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2
Concerns Over Fiscal Health
Rising worries about Japan's fiscal sustainability impact currency and bond yields.
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3
Funding Strategy
The government plans to use tax revenues and issue bonds for funding.
Takeaways
Japan's ambitious stimulus package aims to revitalize the economy but raises significant concerns about fiscal sustainability and its impact on the currency and bond markets.