Japan has rolled out its largest stimulus since the pandemic, a ¥21.3 trillion ($135.5 billion) economic package aimed at shielding consumers from inflation, boosting defense, and reviving growth. But the move has sparked fresh anxiety in global markets, sending the yen tumbling and bond yields to record highs.

A Massive Spending Plan

Prime Minister Sanae Takaichi’s cabinet approved the plan on Friday, November 21, marking her first major policy initiative since taking office. The package includes:

  • ¥17.7 trillion in direct spending
  • ¥2.7 trillion in tax cuts
  • ¥900 billion in special account outlays

It focuses on energy subsidies, cash handouts, and defense spending.
Households will receive about ¥20,000 per child, and gas and electricity bills will be subsidized by ¥7,000 over three months.

The government says this could cut headline inflation by 0.7 percentage points early next year and lift GDP by 1.4 percentage points per year for three years.

Market Reaction: Yen Weakens, Yields Spike

The yen fell to ¥157 per dollar, its weakest since January, while 40-year Japanese bond yields hit 3.7%, the highest on record. Finance Minister Satsuki Katayama warned that FX intervention remains an option under the September US–Japan agreement if the yen slides toward 160.

The Bank of Japan’s Governor Kazuo Ueda cautioned that a weak yen is fueling higher import costs, pushing inflation to 3% in October, above the BOJ’s 2% target for the 43rd consecutive month.

Takaichi defended her spending plan, saying it “fully takes into account fiscal sustainability.”
Still, analysts fear the new debt issuance will push Japan’s fragile fiscal position closer to a Liz Truss-style crisis, where bond markets rebel against heavy borrowing.

Global Ripples: Bitcoin and Risk Assets React

The impact went beyond Tokyo. Bitcoin plunged below $83,000, with $1.9 billion in leveraged positions liquidated in 24 hours. Analysts said Japan’s move, effectively another form of quantitative easing (QE)—unsettled investors, pushing them out of risk assets.

Economist Kohei Okazaki told Bloomberg that the package “is merely an early rollout of key measures,” with an even broader growth strategy still to come, suggesting Japan’s spending spree may continue.

While more liquidity could support Bitcoin and risk assets long-term, the yen carry trade—worth nearly ¥20 trillion—faces pressure. A sudden unwind could force global asset sales, adding volatility to both stocks and crypto.

Bitcoin’s Selloff Deepens as Market Stress Builds, Liquidations Surge

Outlook: Fiscal Firepower vs. Fragile Confidence

Japan’s government expects total economic impact of ¥42.8 trillion ($273 billion) once private-sector boosts are included. But with debt already above 260% of GDP, questions remain about how long Tokyo can sustain such aggressive stimulus.

For now, Japan’s move mirrors China’s liquidity push and signals that Asia’s central banks are still in easing mode, even as the US Federal Reserve debates rate cuts.

Still, as one analyst put it:

“This may help Japan’s economy in the short run, but the price will be paid later through inflation and global volatility.”

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