Tokyo:  Japan’s newly formed coalition government led by Prime Minister Sanae Takaichi is preparing a massive economic stimulus plan, signalling a new direction for the country’s policy strategy and marking a departure from the era of Abenomics.

According to government sources, the spending package could exceed last year’s 13.9 trillion yen plan. The proposal is expected to include tax cuts for households, subsidies to ease rising energy costs, and reductions in gasoline taxes to cushion the impact of inflation on consumers.

However, despite the size of the package, analysts note that the new government’s approach differs sharply from the Abenomics model that relied on aggressive monetary easing and deficit-financed stimulus. Instead, Takaichi’s administration appears focused on supporting economic growth while keeping inflation and fiscal discipline in check.

The coalition between Takaichi’s Liberal Democratic Party (LDP) and the reform-oriented Japan Innovation Party (Ishin) is also expected to influence this shift. Ishin, known for its emphasis on smaller government and fiscal prudence, is likely to moderate the LDP’s traditionally expansionary policies.

“The new government wants to boost spending but without the full-scale stimulus of Abenomics. It’s a balancing act between growth and control,” said one Tokyo-based economist.

Monetary policy is also undergoing a transition. The Bank of Japan, which maintained ultra-loose policy for years, has begun tightening rates amid rising prices. While Takaichi once opposed rate hikes, she now supports maintaining moderate inflation backed by wage growth. Ishin, meanwhile, has called for a gradual normalization of the central bank’s policy once economic stability returns.

Experts warn that any political interference in central bank policy could weaken the yen further and push inflation higher, posing new challenges for the government.

Japan’s new leadership faces a delicate test stimulating the economy without reigniting the problems that Abenomics once sought to solve. The coming months will reveal whether this new fiscal path can deliver steady growth while maintaining public trust.