Japan is getting ready to throw together an emergency spending package to deal with the hit from President Donald Trump’s new trade tariffs.
On Monday in Tokyo, Prime Minister Shigeru Ishiba said the government could compile an extra budget if needed, which would be used to protect the country’s fragile economy. He confirmed this during a tense parliament session, according to Reuters.
The pressure is coming from every angle: rising costs, election losses, tax fights, and now another round of tariff uncertainty from Washington.
Shigeru’s coalition is already wounded after taking a loss in last month’s upper house vote. That’s left him with less political muscle and a louder opposition, who’ve been pushing him hard to slash Japan’s sales tax and ramp up government spending.
Right there in parliament, he was asked directly if the government would commit to tax cuts and a stimulus budget. “We will compile one if necessary, taking into account discussions with other parties,” he replied, keeping it vague but opening the door. If this happens, the budget would be submitted to a special Diet session expected in September.
Parliament pushes for debt-funded relief package
The tariffs in question come from the Japan-U.S. trade deal agreed last month. Under that deal, the U.S. agreed to lower some duties on Japanese goods, including cars. But the key problem is still sitting on the table.
The 25% tariffs on automobiles and auto parts haven’t been reduced yet, and no one knows when it will happen. The deal includes a plan to cut them to 15%, but the lack of a timeline is now putting Japan’s exporters in limbo.
This all lands while the Japanese economy is already dealing with rising food prices and weak consumer demand. The sales tax, currently set at 10% for most goods and 8% for food, is getting blamed for worsening the pain. The opposition wants it cut or dropped.
On top of that, Japan’s fiscal situation is already tight. The government is spending 115.5 trillion yen this year, and nearly a quarter of that, 24.5%, is going toward debt repayments. If an emergency budget goes through, analysts estimate it could hit around 10 trillion yen, or $67.68 billion, all of which would need to be borrowed.
Compiling extra budgets has become standard operating procedure in Japan. While other countries cut back their pandemic-era stimulus plans, Japan kept spending. That’s made the national debt problem worse, and now with the Bank of Japan looking at raising interest rates, the cost of all this borrowing could rise even more.
Ishiba defends handshake deal with Trump, skips signing
The lack of a written agreement with Trump raised more heat during Monday’s session. Lawmakers questioned why Shigeru didn’t sign an official document during trade talks last month. His answer was blunt: “Creating a document could have delayed the timing of tariff cuts. That was our biggest fear.” Instead, he chose to settle the deal verbally to avoid pushing back the schedule.
Shigeru didn’t try to sugarcoat his thoughts on the U.S. president. “He is not a typical counterpart and could overturn rules,” he said, defending the unusual route he took.
But he also made it clear he’s not backing down from the next step. “I have absolutely no hesitation” to meet Trump again, he said, when asked if he would push for the U.S. to deliver the agreed cuts.
He didn’t say when that meeting might happen. But he did emphasize what comes next. “Both countries will begin executing what was agreed upon, which is harder than agreeing on a deal.”
With that, Shigeru signaled his plan to stay in office long enough to make sure Trump follows through. No more talking. Japan wants results.
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