Report: Japan's economic plan considers incorporating three major areas: chips, minerals, and defense

Japanese Prime Minister Sanae Takaichi plans to launch a new growth strategy through the first economic stimulus plan, focusing on investments in 17 key areas such as semiconductors, critical minerals, and the defense industry. This policy shift marks Japan's move towards a more expansionary fiscal policy, aiming to build a strong economic growth foundation through "crisis management investment and growth investment."

On November 10, according to media reports, documents released today show that a Japanese government expert group responsible for formulating the new economic strategy recommends initiating key investments in areas such as chips, artificial intelligence, shipbuilding, the defense industry, and critical minerals through this economic plan. Takaichi stated after the meeting, "We need to promote private investment by increasing the predictability of investments."

Reports indicate that as this investment plan is introduced, Takaichi has reached an agreement with U.S. President Trump to ensure the supply of critical minerals such as rare earths and to collaborate in the shipbuilding industry. She has also ordered that defense spending reach 2% of GDP in the fiscal year ending next March, achieving this goal ahead of the original plan.

Analysts point out that the new policy will test Takaichi's ability to fulfill campaign promises without raising investor concerns about Japan's fiscal health. Japan's debt burden remains the highest among developed economies, and excessive spending could trigger bond market worries, pushing up long-term yields and exacerbating inflationary pressures.

17 Key Investment Areas Targeting Strategic Industries

The government expert group noted after its first meeting that the economic plan should focus on 17 areas that Takaichi believes are crucial for Japan's economic growth.

In addition to semiconductors, artificial intelligence, shipbuilding, the defense industry, and critical minerals, the plan also includes measures to strengthen supply chains, nurture startups, promote financial growth, and help companies increase wages.

Takaichi's government plans to cultivate a virtuous economic cycle by strengthening supply structures, increasing income, improving consumer confidence, and enhancing corporate profits, while expanding tax revenue without raising tax rates.

To ensure the implementation of investment plans related to the Japan-U.S. tariff agreement, the expert group stated that the government should strengthen the financial foundation of the Japan Bank for International Cooperation and Japan's trade insurance.

Although the Japanese government has announced a promising project list, the $550 billion investment fund has yet to be launched.

Coordination of Fiscal and Monetary Policies Becomes a Focus

Takaichi has made it clear that she will shift towards a more expansionary fiscal policy.

Last week, she pointed out that Japan has only completed half of the process of achieving stable inflation supported by wage growth, suggesting that she hopes the Bank of Japan will remain cautious as it gradually raises interest rates. She also emphasized her commitment to implementing a fiscal policy that is both expansionary and responsible.

Japan's Economic Growth Strategy Minister Minoru Kiuchi stated:

"The top priority of this cabinet must be to address the high prices currently faced by the public. To this end, we need wage growth that exceeds the inflation rate. We must recognize that the government's role is to create an environment conducive to sustainable wage increases."

Members of the expert group include former Bank of Japan member Goushi Kataoka, who was known for advocating strong monetary easing policies during his tenure at the central bank. This selection reflects Takaichi's inclination towards stimulus policies. Kataoka stated:

"The Gao City government is placing a high priority on economic growth."

The report also pointed out that although the expert group's recommendations did not include specific details on price relief measures, Gao City is expected to use additional subsidies to reduce winter utility costs and gradually reduce gasoline taxes by the end of December.

The scale and nature of this economic plan, as well as the supplementary budget that will fund it, will serve as the first indicator of Gao City's commitment to advancing campaign promises and will test her ability to implement these policies without raising concerns among investors.

Economists expect the scale of the plan to exceed last year, but excessive spending could raise concerns in the bond market, pushing up long-term yields and triggering strong inflation