The Japanese yen has fallen below a new low for October! Takashi Saito has allocated 21.3 trillion yen in fiscal spending to save Japan, while the market worries it may lead to a vicious cycle.

Kishida Fumio launched a 20 trillion yen stimulus plan, attempting to alleviate the 3% inflation pressure, but this has made the yen exchange rate and central bank policy even tighter. (Background: Is the yen finally hitting bottom and set to rise? Wall Street hedge funds “massively buy the dip on the yen” betting on exchange rate appreciation) (Additional background: Is yen appreciation hopeless? With Kishida Fumio elected as Prime Minister, the yen has fallen below 150 against the dollar, traders are pessimistic about hedging.) The new Prime Minister Kishida Fumio led the cabinet to announce today (21) the launch of a fiscal stimulus plan exceeding 21.3 trillion yen, attempting to garner public opinion under the dual pressure of 3% inflation and continuous depreciation of the yen. However, market reactions indicate that this cash infusion is not only soothing voter sentiment but may also ignite the next wave of price and exchange rate chain reactions. Full-fledged fiscal stimulus aims to make citizens feel the effects. According to Japan Core Inflation statistics, the year-on-year increase in Japan’s core CPI in October reached 3.0%, while the “core-core” CPI also reached 3.1%. After the summer energy subsidies ended, electricity prices soared by 3.2%, and gas prices also rebounded. Price pressures are no longer a one-time shock but are deeply rooted in daily expenses. Former Prime Minister Shigeru Ishiba fell due to inflationary anger, and Kishida's primary task upon taking office is to ensure that cold numbers do not further burden voters' wallets. Kishida's proposed “rocket launcher” includes three major elements: first, a one-time cash distribution of 20,000 yen for each child; second, the reactivation of subsidies for water, electricity, and gas to directly reduce the increase in bills; third, targeting industries such as AI and semiconductors for capital subsidies, hoping to drive corporate salary increases and investments. The scale of 20 trillion yen is approximately 129 billion USD, equivalent to about 3.5% of Japan's GDP. Kishida hopes to exchange fiscal expansion for a win-win of “inflation moderation + wage growth,” but this comes with the cost of rapidly increasing future debt. The yen breaks new lows, and the Trump effect amplifies negative feedback. The market responded quickly to the massive deficit. The expectation of large-scale bond issuance weakened the confidence in fiscal discipline, causing the yen to drop to a 10-month low against the dollar. At the same time, in 2025, former President Trump is pushing for a strong dollar policy again, making it even harder to ease the Japan-US interest rate spread. Hiroshi Kumano, chief economist at Dai-ichi Life Research Institute, warned: “This could lead to a vicious cycle: the more government subsidies, the more the yen depreciates, and the higher import prices become.” In other words, the inflation from the depreciated exchange rate could offset the short-term relief of the stimulus package on household bills. The central bank is caught in a dilemma, with monetary and fiscal measures out of sync. The 3% inflation should have intensified calls for the Bank of Japan to raise interest rates in December, and according to BOJ rate hike news, the market initially expected a higher probability of action by the end of the year. However, Kishida's team hinted at “watching the effectiveness of the stimulus before discussing interest rates,” postponing the timing possibly until March 2026, putting monetary policy in a bind: if rates go up, it will increase government financing costs and weaken the stimulus effect; if rates don't go up, the yen will continue to depreciate and inflation will keep rising. This contradictory signal of fiscal acceleration and central bank hesitation is eroding foreign confidence in Japanese assets. Kishida Fumio's 20 trillion yen gamble may provide short-term relief for household spending, but the long-term challenge lies in whether Japan can achieve a balance between fiscal discipline, exchange rate stability, and reasonable inflation. The tightrope has been pulled to its limit, and whether it leads to recovery or a deep abyss of imbalance will be revealed in the coming months. Related reports: Privacy sector explodes, detailed explanation of a16z continuously leading two rounds of funding for the privacy blockchain Seismic Zcash(ZEC) rising against the trend by 40% and breaking through 700 USD, the privacy coin sector surges. Privacy coin Aztec opens public sale, after 7 years, is there still someone willing to buy? “The yen has fallen below the October low! Kishida Fumio throws 21.3 trillion yen in fiscal spending to save Japan, and the market fears it will become a vicious cycle.” This article was originally published in BlockTempo, the most influential blockchain news media.