Japan approves first economic policy guidelines under PM Takaichi

Japanese Prime Minister Sanae Takaichi's Cabinet on Tuesday approved its first comprehensive economic and fiscal policy guidelines, targeting aggressive fiscal spending in strategic sectors and a combined 370 trillion yen ($2.3 trillion) in public and private investment by 2040, according to Kyodo News.

Investment Strategy

The longer-term policy guidance is designed to provide businesses with greater predictability, designating the next fiscal year beginning in April as "the first year of responsible and proactive" spending. Under the new framework, the government will boost investment in 17 fields related to economic security, crisis preparedness and strategic industries, with semiconductors receiving particular emphasis.

To secure necessary funding, the state budget will include a newly created investment allocation from fiscal 2027 onward aimed at creating a "strong and prosperous Japan," allowing ministries to make budget requests without upper limits. The government will "fundamentally change the way the budget is made," the policy document stated, adding that requests will be assessed based on expected contributions to economic growth and investment returns.

Fiscal Policy Shift

Speaking at a joint meeting of government panels, Takaichi said her administration will work "to build a strong economy and ensure fiscal sustainability," while striving to gain market trust through consistent communication. Unlike guidelines compiled under predecessor Shigeru Ishiba, the new blueprint does not call for "fiscal consolidation," instead aiming to "stably" reduce the debt-to-GDP ratio over multiple years. "Among advanced countries, there is a big trend of the government and private sectors working together on large-scale, long-term industrial spending," the document noted. The guidelines target sustained real growth exceeding 1 percent and nominal growth above 3 percent "as early as possible."