On November 29, 2024, Japan's government finalized a supplementary budget totaling 13.9 trillion yen (approximately $92 billion) aimed at alleviating the financial strain on households due to rising living costs. This spending package includes direct handouts to low-income families and extended fuel subsidies, following a series of stimulus initiatives implemented since the COVID-19 pandemic.
Prime Minister Shigeru Ishiba emphasized the necessity for wages to increase at a pace that outstrips inflation to enhance household wealth. He stated, 'Until we achieve an economy where wage growth exceeds inflation, we must support those who won't reap the benefits of higher wages as much as others.'
The supplementary budget, which slightly surpasses the previous year's 13.2 trillion yen stimulus, received cabinet approval and will be discussed in an extraordinary parliamentary session. Key components of the budget include resuming subsidies to mitigate utility costs from January to March 2025, extending petrol subsidies, and increasing funding for disaster relief and the technology sectors, particularly in chips and artificial intelligence.
Analysts from Mizuho Research & Technologies predict that this budget could boost Japan's GDP by 0.1% in fiscal 2024 and 0.6% in 2025, primarily through enhanced consumption and public works spending. However, concerns remain regarding the sustainability of such fiscal measures amid rising inflation and persistent supply constraints, such as labor shortages.
The political landscape adds to the uncertainty, as the ruling coalition's minority status may lead to further fiscal expansion.