Japan Finalizes $92 Billion Supplementary Budget

Japan's government has finalized a supplementary budget of $92 billion aimed at shielding households from rising living costs, which includes handouts to low-income families and extended fuel subsidies. Despite the potential boost to consumption, this spending package further strains Japan's already high public debt, which is over twice the size of its economy. Prime Minister Shigeru Ishiba emphasized the need for wage growth to surpass inflation to enhance household wealth and indicated that the budget’s approval comes amid rising inflation and labor shortages. The package will be partly financed by higher-than-expected tax receipts and unused funds, limiting the need for new bond issuance. Analysts project a modest GDP growth impact of 0.1% in fiscal 2024 and 0.6% in 2025, raising questions about the necessity of such extensive spending given the current economic conditions. Critics are concerned that the larger budget could exacerbate fiscal challenges, as Japan’s general government debt exceeds 250% of its GDP.