On March 31, Japan’s National Diet enacted a budget bill for fiscal year of 2025 with a majority vote of the ruling coalition of the Liberal Democratic Party (LDP) and Komeito, with the support of Nippon Ishin (the Japan Innovation Party) after multiple revisions in both the Lower and Upper Houses. The fiscal 2025 budget reached a record high of 115.20 trillion yen ($770 billion), and it was the first time for the Japanese government to enact a budget bill after revisions approved by the House of Councillors and then the House of Representatives under the current constitution. The enactment, which took place on the final day of fiscal year 2024, represented a hard-won victory for the minority government of Prime Minister Ishiba Shigeru.
The power balance in the National Diet in the Ishiba administration drastically changed after the Lower House election on October 27, 2024. As a result of the election, the LDP-Komeito coalition government was not able to maintain majority in the House of Representatives, and the LDP ended up as a “minority ruling party” that needs cooperation by opposition parties for lawmaking and legislative processes.
Prior to the Ishiba government, budget bills were automatically enacted with a solid majority in the Diet. During the Budget Committee, the Ishiba administration was faced with objections not only by opposition parties, but also by some LDP Diet members in the Upper House. The budget bill passed the Lower House on March 4, 2025, but it needed to be revised based on requests by opposition parties, the first time this had happened in 29 years. The revised budget bill was supported by the LDP, Komeito, and Nippon Ishin, although an alternative budget bill, submitted by Constitutional Democratic Party of Japan, the second-largest party in the National Diet, was not approved.
A significant agenda item in current Japanese politics is “politics and money” (seiji to kane). This was the reason why the LDP lost its power and seats in the National Diet.
As the scholars Maxwell E. McCombs and Donald L. Shaw have argued, mass media has an “agenda-setting” function, which plays a critical role in shaping political reality. Indeed, power and money has become a controversial topic in Japan, with Diet members criticized for their financial scandals. Ishiba placed an emphasis on the economy during the 2024 Lower House election campaign, advancing the notion of “Ishibanomics,” as previously discussed in The Diplomat. Japanese media critically reported that the issue of political fundraising parties had caused widespread public condemnation, yet Japanese politicians would not be able to abolish it. In response to the criticism, the LDP decided to call for and end to political activity expense funds and a revision of the Political Funds Control Law.
During the Budget Committee of 2025, the Ishiba administration discussed reform of the high-cost medical expense benefit system, which is intended to reduce the financial burden on patients when their medical expenses become too high, especially for surgery and long-term treatments. The reform was thought to undermine the safety net of Japan’s medical care system, and opposition parties and patient organizations voiced their objection to the policy change. LDP lawmakers in the Upper House also disagreed with the reform plan, and the Ishiba government needed to discuss the budget proposal legislation in the Lower House again, even after the passage of the bill. As a result, Ishiba was forced to shelve the reform of the high-cost medical expense benefit system, which was scheduled to be implemented in August 2025. Ishiba apologized to the Lower House Budget Committee that he had “made a mistake in my judgment that I could gain the understanding of patient groups.”
The case of the high-cost medical expense benefit system reform indicates that it is difficult for the prime minister to make a top-down decision when the power balance in the Diet is against the ruling parties.
In addition to the fundraising party issue, and the influence of inflation, Ishiba himself added another “gift voucher” controversy in the politics and money debate, by handing out 1.5 million yen (approximately $10,000) worth of gift vouchers to novice LDP Diet members. The cabinet’s approval rating sharply dropped, arguably as a result of the backlash, although it continued falling in the middle of the Budget Committee in the Diet. According to a survey by Asahi Shimbun, the cabinet approval rating dropped to its lowest level since Ishiba took office in October 2024. Indeed, the Asahi survey showed that the cabinet approval rating plummeted from 40 percent to 26 percent, whereas the disapproval rating soared from 44 percent in the previous survey to 59 percent, as a result of the gift-giving scandal.
After these controversies and revisions, the budget legislation for fiscal year 2025 was finally enacted one day before the beginning of fiscal year 2025.
This must have come as a relief for the Ishiba administration, but it is uncertain whether the initial budget for fiscal year 2025 will improve the living standards of the Japanese people. From the perspective of the Japanese public, the Ishiba government is expected to provide sufficient amounts of rice at a reasonable price. Rice prices have risen in recent years due to a poor rice harvest in the summer of 2023, hot weather, the influence of continuing global inflation, and the excessive amount of consumption by foreign tourists, facilitated by the weak yen. The Ishiba administration announced that it would release government rice stockpiles to curb the increase in rice prices, but prices stayed high; as of last month, they were more than twice as high as a year prior. In addition to the surge in rice prices, the people of Japan have suffered from ongoing general inflation.
The Ishiba administration explained that it would make the best of the current budget to curb the impact of inflation on consumers rather than rolling out new budget spending. Ishiba also promised to take measures to protect local jobs from the Trump administration’s 25 percent tariff on U.S. car imports, which could have significant impacts on the Japanese economy. On March 30 in Yokohama, Koizumi Shinjiro of the LDP proposed that the Japanese government take thorough measures against inflation amid the uncertainties of the Japanese economy as it heads toward Upper House elections on July 28.
In 1918, the Terauchi Masatake Cabinet was forced to resign in the wake of rice riots, which originally occurred in Toyama Prefecture and rapidly spread nationwide. With this history in mind, the Ishiba administration is expected to work to bring rice prices under control as soon as possible, and take swift and sufficient measures against inflation ahead of the summer.