Japan’s powerful lower house approved a $118 billion extra budget on Thursday to pay for Prime Minister Sanae Takaichi’s aggressive spending plans including anti-inflation measures and a boost to Japan’s military.
The 18.3-trillion-yen budget passed the chamber after three independent lawmakers agreed last month to work with the ruling Liberal Democratic Party (LDP), giving Takaichi the legislative majority she needs to pass bills.
The budget will be forwarded to the upper house, where Takaichi’s coalition still falls short of the majority.
But two opposition parties — the Democratic Party For the People and the LDP’s former partner Komeito — have pledged to vote for the budget, putting the measure on track to clear the upper house next week.
The budget is designed to pay for a 21.3-trillion-yen stimulus that Takaichi announced last month, including energy subsidies, cash handouts, and investment incentives in key fields like semiconductors and artificial intelligence.
It also includes expanded spending on defence, as China increases military activities in the wider region.
“We will implement strategic fiscal spending to protect people’s livelihoods and build a strong economy,” Takaichi said last month.
More than 60 percent of the planned spending will come from new government bonds, rekindling the market’s anxiety about Japan’s fiscal health.
Japan already has the biggest ratio of debt to gross domestic product (GDP) among major economies, projected to reach 232.7 percent this year, according to the International Monetary Fund.
Takaichi has long promoted huge government spending.
Under her leadership, Japan’s long-term rates have climbed to the highest level in nearly two decades as investors dumped Japanese government bonds.
“It is an unusual situation, unseen in recent years, for financial markets to have moved to this extent in response to fiscal risks,” Takahide Kiuchi, executive economist at Nomura Research Institute, said in a note after Takaichi announced the stimulus.
“This is a warning from the markets,” he said.
Still Takaichi has so far remained unusually popular among voters, with her cabinet approval rating standing well above 60 percent in various media polls.
After the three independent lower-house lawmakers pledged their support for the premier, agreeing to vote with the LDP, Takaichi’s ruling coalition with the Japan Innovation Party now commands 233 seats in the 465-seat lower house.
The long-governing LDP lost the legislative majority a year ago after an election loss under then Prime Minister Shigeru Ishiba, who was replaced by Takaichi in October.
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