Prime Minister Sanae Takaichi has indicated a strong stance against the issuance of substantial deficit-covering government bonds as part of a supplementary budget aimed at mitigating the economic impact of the Middle East conflict. In discussions with party leaders on May 20, Takaichi emphasized the importance of safeguarding both livelihoods and economic activities without resorting to heavy borrowing. She noted that discussions on the scale and specifics of an additional budget for fiscal 2026 are not yet underway, but mentioned that surplus funds from fiscal settlements and other resources would be available soon.
Though previously dismissive of the need for an extra budget, Takaichi recently directed Finance Minister Satsuki Katayama to consider one, following a meeting with the government-ruling coalition. This shift has drawn criticism from opposition leaders like Junya Ogawa, who questioned the timing of her actions. Takaichi refuted these claims, asserting that her instructions were timely, revealing that preliminary studies on a supplementary budget were initiated before the Golden Week holidays.
In response to the ongoing economic challenges, the government is already providing significant subsidies to maintain gasoline prices at approximately 170 yen ($1.06) per liter. Democratic Party for the People leader Yuichiro Tamaki has advocated for extending these subsidies within the supplementary budget, proposing a gradual increase in the threshold for their activation. Takaichi expressed openness to this suggestion, indicating a strategic consideration of the proposal.
The disruption of the Strait of Hormuz has prompted companies to adopt measures against potential shortages of naphtha, crucial for petrochemical products. For instance, Calbee Inc. announced a shift in packaging color due to unstable ink supplies. Despite these challenges, Takaichi’s administration maintains that naphtha supplies are adequate, attributing distribution issues to supply-chain constraints. Industry Minister Ryosei Akazawa has been tasked with addressing these bottlenecks comprehensively.
Additionally, Takaichi reiterated her commitment to eliminating the consumption tax on food items, pending an interim report from the national council on social security. This legislative proposal is anticipated to be introduced to the Diet before the summer, reflecting the administration’s ongoing efforts to address economic and social issues comprehensively.
