Japan to Unveil Record-High Budget Amid Soaring Inflation and Property Prices
Japan is set to pass its largest-ever budget for FY2026, a move by Finance Minister Katayama that comes as the nation battles persistent inflation and record Tokyo property prices.
The Japanese government is set to approve its largest-ever national budget for the upcoming fiscal year, a move that highlights the complex challenges facing the world's fourth-largest economy. Finance Minister Shigeyuki Katayama confirmed on December 22 that the budget for fiscal year 2026 will be a record high, coming at a time when the nation is grappling with persistent inflation and a red-hot property market in its capital.
Inflationary Pressures and a Booming Asset Market
The government's expansionary fiscal policy coincides with growing economic headwinds for consumers. On December 23, reports indicated that a suspension of pork imports from Spain is fueling concerns about future price hikes, putting further pressure on household budgets already strained by inflation.
In stark contrast, the asset market is overheating. According to data released on December 22, the average price for a new condominium in Tokyo's 23 wards hit a staggering ¥124.2 million (approx. $840,000) in November 2025. This record figure points to a deepening disconnect between the real economy and soaring asset valuations.
Social Strains and a Shifting Labor Landscape
These economic pressures are mirrored by growing social tensions. A recent report revealed that over 7,000 teachers are on leave due to mental illness, with harassment from parents cited as a significant contributing factor. At the same time, the labor market is undergoing a structural shift. Companies are beginning to abolish the traditional 'entry sheet' for job applications, as the widespread use of AI has made candidates' submissions nearly indistinguishable from one another.
The record-breaking budget underscores a critical policy dilemma for Tokyo. While massive government spending is intended to stimulate growth and address deep-seated demographic issues, it risks fueling the very inflation it's meant to help citizens overcome. This puts the Bank of Japan in an increasingly difficult position as it navigates the path toward policy normalization.
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