key takeaways
- Even as politicians are debating how to respond to US tariffs, the Ishiba government has begun deliberations on the FY2026 budget, with a focus on how to pursue fiscal consolidation.
- Although Prime Minister Ishiba Shigeru and fiscal hawks in the government have emphasized the need for “fiscal resilience,” they face a significant challenge in the near term as politicians in ruling and opposition parties call for a significant stimulus package including a consumption tax cut in some form.
- With fiscal hawks and doves deadlocked over a supplemental budget, it may take an exogenous shock — such as new economic data, polling shifts, or a breakthrough in U.S.-Japan negotiations — to resolve the standoff.
Japan Foresight 