Recently elected Japanese Prime Minister Sanae Takaichi has proposed an ambitious 21 trillion yen ($135 billion) spending program that puts new stresses on already heavily overdrawn government coffers and raises the specter of a Liz Truss-style market shock. For international investors, it adds further uncertainty, but for the Japanese bond market, it is déjà vu all over again.

The plan fulfills Takaichi’s campaign promise of a “proactive fiscal policy” that is designed to bring Japan out of its long stupor since the collapse of the bubble economy back in 1990. Taking note of public opinion polls, a major part of the spending will be intended to help people cope with higher prices through various subsidies rather than taking more painful steps to control inflation itself.

Recently elected Japanese Prime Minister Sanae Takaichi has proposed an ambitious 21 trillion yen ($135 billion) spending program that puts new stresses on already heavily overdrawn government coffers and raises the specter of a Liz Truss-style market shock. For international investors, it adds further uncertainty, but for the Japanese bond market, it is déjà vu all over again.

The plan fulfills Takaichi’s campaign promise of a “proactive fiscal policy” that is designed to bring Japan out of its long stupor since the collapse of the bubble economy back in 1990. Taking note of public opinion polls, a major part of the spending will be intended to help people cope with higher prices through various subsidies rather than taking more painful steps to control inflation itself.

While still low by global standards, Japan’s inflation rate of around 3 percent is being felt by consumers, especially since much of the increase comes in higher costs for food, up 6.4 percent in November compared to levels one year ago, including a 40.2 percent increase in the price of the daily staple of rice. Takaichi has proposed measures that include subsidies for electricity and gas bills as well as cash handouts for households with children.

In addition, she wants to make targeted investments in sectors such as semiconductors and shipbuilding, plans that recall the glory days of Japan’s state economy in the 1950s and 1960s, when the powerful Ministry of International Trade and Industry played a key role in the economy—and arguably helped to create the postwar “economic miracle.”

While few would argue with the hopes for a fast-growing Japanese economy, there seems to be little reason to think that Takaichi will succeed where all her predecessors have largely failed. Prior attempts at fiscal stimulus, especially ones attempted in the 1990s with a focus on big........

© Foreign Policy