Japan Unveils Major Stimulus as Markets React Cautiously

Japan’s new Prime Minister Sanae Takaichi has moved quickly on her pledge to pursue bold, expansionary fiscal policy, with her cabinet approving a multi-billion-dollar stimulus package on Friday. The package, valued at JPY 21.3 trillion (roughly $135.4 billion), represents one of the country’s most aggressive financial responses since the COVID-19 pandemic and signals the administration’s commitment to easing economic pressures on households and businesses.

According to government data shared in Japanese media, the plan includes JPY 17.7 trillion in general account spending, notably higher than last year’s JPY 13.9 trillion. It also incorporates approximately JPY 2.7 trillion in tax cuts designed to support consumer spending and help offset the rising cost of living. While fiscal stimulus is traditionally associated with inflationary pressures, Takaichi’s government argues that this targeted approach will help relieve the immediate burden of elevated prices rather than exacerbate inflation further.

The move comes at a time when global markets are still navigating post-pandemic shifts, persistent inflation, and heightened geopolitical uncertainty. Interestingly, bitcoin—often regarded as a hedge against inflation, monetary expansion, and government spending deemed excessive—did not respond positively to the announcement. Instead, BTC slipped 0.8% to $85,480, extending a broader downturn that has pulled the cryptocurrency down from its record high of $126,000 reached on October 8. The decline suggests that traders may already have priced in macroeconomic concerns or are consolidating gains after bitcoin’s recent rally.

Analysts note that Japan’s stimulus could influence global risk sentiment, particularly if it enhances domestic demand in one of the world’s largest economies. However, investors are also weighing the long-term implications of rising government debt levels and the possibility of future monetary policy adjustments. As markets absorb this latest development, attention will turn to how effectively the stimulus achieves its goals and whether it can bolster confidence amid ongoing economic challenges.