Japan’s Prime Minister Sanae Takaichi’s cabinet has approved a massive stimulus package worth 21.3 trillion yen (approximately 135.4 billion dollars) to mitigate the impact of economic stagnation and high inflation. This package marks the largest fiscal expansion step the country has seen since the COVID-19 era. Despite being regarded as a hedge against inflation, Bitcoin continued its downward trend, falling below $85,500 amid these developments.
Japan’s Record-Breaking Fiscal Expansion
The Tokyo administration has given the go-ahead for one of the most comprehensive support packages to date in an effort to ease economic slowdown and price pressures on households. The program, valued at a total of 21.3 trillion yen, allocates 17.7 trillion yen for general budget expenditures and 2.7 trillion yen for tax cuts. This plan, significantly larger than last year’s 13.9 trillion yen stimulus, is considered the first concrete step of the Takaichi government’s promised “expansionary fiscal policy.”
Economists are viewing the government’s concurrent efforts to combat inflation and increase household income as an “unconventional” strategy. Classical economic theory suggests that fiscal stimulus carries the risk of triggering price increases. Nevertheless, Tokyo has opted to swiftly deploy budget resources, particularly to alleviate pressures on energy and food prices.
Bitcoin’s Weak Outlook Deepens
Global investors are observing Japan’s aggressive stimulus measures while cryptocurrency markets have turned downward. Bitcoin, identified as a hedge against inflation, has decreased by 0.8% in the last 24 hours, dipping to $85,480. This level indicates a continued wave of selling after the record high of $126,000 seen on October 8.
Analysts suggest that both the abundance of money in traditional markets and Bitcoin’s overbought status are increasing pressure on its price. According to some experts, Japan’s new spending program might support risk appetite in the long run; however, in the short term, the strengthening dollar will continue to exert pressure on crypto assets.
Despite the ambitious nature of Japan’s stimulus approach, concerns linger about its potential to counter inflation without inciting further economic imbalances. For now, the financial world remains cautiously optimistic yet wary of the immediate impact on both traditional and cryptocurrency markets.