On March 4, 2025, Japan's House of Representatives approved a revised draft budget totaling 115.2 trillion yen (approximately $773 billion) for the fiscal year running through March 2026. This marked the first time the budget was amended since 1955, necessitated by concessions from Prime Minister Shigeru Ishiba's minority government to secure opposition support.
Initially crafted by the government back in December, the budget underwent scrutiny and debate before its approval, leading to notable changes, including approximately 340 billion yen trimmed from the original proposal. Such modifications come at a time of significant political shifts, as the ruling coalition, led by Ishiba's Liberal Democratic Party (LDP), faces challenges after losing over 70 seats during the late October 2024 general election.
The loss of control over the 465-member lower house has compelled the LDP and its coalition partner Komeito to negotiate more closely with opposition parties, namely the Japan Innovation Party (JIP) and the Democratic Party for the People (DPP). These parties have voiced strong concerns about financial policies affecting the younger generation. The JIP had pushed for the inclusion of provisions ensuring free high school education, which played a part in securing its backing for the revised draft. Meanwhile, the DPP emphasized raising the non-taxable annual income threshold from 1.03 million yen to bolster disposable income among citizens, particularly targeting younger earners.
To address these concerns, the ruling coalition agreed to lift the income threshold to 1.6 million yen, albeit facing some backlash due to apprehensions over potential declines in government revenue. Despite these negotiations, the DPP voted against the draft budget, signaling their dissatisfaction with the final terms.
During the approval process, Finance Minister Katsunobu Kato stressed the importance of the fiscal 2025 budget, asserting it is "essential to allow every citizen to feel prosperous and respond to the structural changes confronting our society appropriately." This sentiment aims to alleviate apprehensions over economic stability and public welfare as Japan braces for fiscal and social transitions.
Notably, this year's budget is unprecedented, being the first time since 1996, the Diet has approved such drastic amendments to the initial budget draft. Many observers view these changes as the government’s attempt to stabilize the shifting political climate and cater to public expectations for financial support.
The parliamentary deliberations were not solely focused on broad fiscal policies; issues related to healthcare costs also emerged as focal points of contention. Ishiba defended the need for healthcare reforms, declaring during the parliamentary session, "High-cost health care services are likely to become more prevalent as medical science advances," hinting at the necessity of sustaining certain systemic costs.
Looking forward, the budget must now navigate its way through the House of Councillors for final approval, where experts estimate the ruling coalition’s majority status will facilitate its passage. This budget approval carries significant weight as it embodies the government's commitment to respond adequately to the pressing needs of Japanese citizens during uncertain times.
Overall, the cabinet will be monitoring the response of the populace and opposition parties closely as the revision has been characterized by fiscal constraints, hinged not just upon economic forecasts but also on political dynamics following the recent elections. The outcry from opposition factions, particularly the Constitutional Democratic Party of Japan, highlights the complicated balance between necessary fiscal policies and political appeasement.
With the discussions scheduled to carry on post-approval, the focus will invariably shift to how these policies will directly impact ordinary Japanese families and society at large, particularly with reforms targeting educational and healthcare costs aimed at fostering broader prosperity.