Japan Plans Extra Budget Amid US Tariff, Fiscal Pressure

Japanese Prime Minister Shigeru Ishiba announced the government's readiness to compile an extra budget to mitigate the economic impact of U.S. tariffs, responding to pressure from opposition parties following a recent election defeat. The supplementary budget, potentially around 10 trillion yen ($67.7 billion), would be proposed during an extraordinary parliamentary session expected in September and would add to Japan's already record 115.5 trillion yen fiscal year budget. While the U.S.-Japan trade deal under President Donald Trump has lowered tariffs on some goods, uncertainty about the timing for reducing auto tariffs from 25% to 15% clouds Japan's export-driven economy recovery. Opposition parties are also pushing for reducing or eliminating the 10% sales tax to support consumers facing rising food prices, but Ishiba remains cautious due to fiscal conservatism and the need to fund social welfare for Japan's aging population. The extra budget would likely necessitate additional debt issuance, further straining Japan's public finances, which are already burdened with debt at 250% of GDP and rising debt servicing costs amid potential interest rate hikes by the Bank of Japan. This situation highlights the tension between short-term economic relief efforts and long-term fiscal sustainability challenges for Japan.