Japan adopts new Basic Policy and Growth Strategy with trillion‑yen investment plan

The Japanese cabinet approved the "Basic Policy" (骨太方針) and the accompanying "Japan Growth Strategy" on 21‑22 July 2026. The plan outlines a shift toward "responsible active fiscal policy" that expands crisis‑management and growth‑focused public investment across 17 strategic sectors—including artificial intelligence, semiconductors, regenerative medicine, and household‑assistant robots. The government projects that combined public and private spending will exceed 370 trillion yen by fiscal year 2040, aiming to raise the country’s potential growth rate and achieve fiscal sustainability.

Analysts note that, while the policy signals a positive outlook for Japanese equities, its impact depends on the allocation of clear budgetary resources. The original draft omitted explicit language on fiscal consolidation, prompting concerns among bond‑market participants; 10‑year JGB yields rose and the yen faced pressure. Critics also highlighted Prime Minister Sanae Takaichi’s personal workload—reporting she read hundreds of pages of policy documents and handled thousands of emails, a detail that sparked public debate about leadership capacity.

Overall, the new policy seeks to revive domestic investment, boost productivity, and improve public trust in fiscal management, but its success will hinge on transparent financing and coordination with the Bank of Japan.