Prime Minister Sanae Takaichi announced a departure from stringent budget controls on Friday while aiming to assure financial markets of her intention to introduce transparent fiscal guidelines. This comes as she seeks to promote investment in priority growth areas through a revamped, multi-year budgeting system—an approach that redefines Japan’s traditional single-year budget allocations.
The prime minister, recognized for backing both expansive fiscal measures and continued monetary easing, secured a decisive electoral win in February after advocating for increased public spending and a temporary suspension of the food consumption tax. These proposals, however, triggered selloffs in the yen and Japanese government bonds last year as investors raised concerns about Japan’s ability to finance its new fiscal direction, given the country’s high sovereign debt levels.
To address market apprehensions, Takaichi stressed that revised budget procedures would include new rules to ensure fiscal discipline while supporting growth. The government’s current approach requires annual approval for all spending, to allow for close parliamentary oversight, but the shift toward multi-year frameworks is designed to facilitate more effective allocation of resources for long-term objectives.
Beyond fiscal changes, Takaichi also addressed security policy, citing increasing pressure from China and laying out intentions to update Japan’s defence strategy. She plans a full review of military export restrictions and aims to strengthen critical supply chains alongside reforming defence policy. Her administration intends to review Japan’s three principal security documents within the year and accelerate considerations on easing limits for exporting defence equipment.
A party policy committee of Takaichi’s Liberal Democratic Party has recommended lifting current constraints on the export of military goods that are not directly lethal, a move that could broaden Japanese defence companies’ access to international markets, according to Kyodo news agency.
