Orlando, Florida & Tokyo, Japan – November 14, 2025 – Both the United States and Japan are deploying an unconventional approach to manage inflation: fiscal stimulus. While fiscal spending is traditionally used to boost economies during downturns, leaders in Washington and Tokyo are now using it to mitigate rising living costs, signaling a shift toward expansionary economic policies despite already stable growth.

U.S. Fiscal Measures: Tariff Dividends and Stimulus Checks

In the U.S., President Donald Trump and his administration are responding to voter concerns about the high cost of living following recent gubernatorial and mayoral election losses. The White House is reportedly considering a $2,000 “tariff dividend” payment to most households, funded by higher tariffs on imported goods.

Treasury Secretary Scott Bessent confirmed the plan is under discussion, highlighting a pivot from deficit reduction toward stimulating nominal economic growth, even if it means tolerating slightly higher inflation. Analysts note that the White House’s broader One Big Beautiful Bill Act already introduced tax cuts projected to increase the federal deficit by $2.4 trillion over the next decade, according to the Congressional Budget Office.

The administration’s priority is clear: keep the economy running hot. Officials appear willing to allow inflation to run closer to 3%, above the Federal Reserve’s 2% target, in exchange for stronger economic activity and growth.

Japan Follows a Similar Expansionary Path

Japan’s new Prime Minister Sanae Takaichi, who came to power after the ruling Liberal Democratic Party’s historic election defeat, is pursuing a comparable approach. Her government is preparing an economic stimulus package likely exceeding last year’s $92 billion, aiming to counteract rising prices and support households.

Takaichi is also reshaping key government economic panels with advocates of fiscal expansion, signaling a willingness to temporarily relax Japan’s long-term fiscal discipline. Both Tokyo and Washington are coordinating with their central banks to keep monetary policy stimulative, though this strategy may clash with traditional inflation-fighting approaches favored by many policymakers.

Risks and Economic Implications

While fiscal stimulus can be highly effective in crises, history shows that its inflation-fighting efficacy is limited when economies are not in distress. Both the U.S. and Japan are experiencing moderate growth, low unemployment, and inflation slightly above targets, rather than a recession or deflationary trap.

Economists caution that fiscal multipliers—the effect of government spending on overall economic growth—are typically smaller in expansions than in recessions, especially when debt levels are already high. As such, using populist fiscal spending to fight inflation is unorthodox and could potentially exacerbate price pressures instead of alleviating them.

Historical crises like the 2007-2009 Global Financial Crisis or the 2020 pandemic demonstrated the utility of fiscal stimulus in emergencies, but applying the same tools in a moderately growing economy carries significant risks.

Outlook

Despite these risks, Trump and Takaichi’s strategies reflect political pressures to ease the cost-of-living burden on voters. Policymakers are opting for short-term relief measures even at the potential cost of higher inflation, challenging conventional economic wisdom.

Markets and analysts will be closely monitoring the outcomes of these policies, particularly as global inflation trends remain sensitive to monetary and fiscal interactions, commodity prices, and geopolitical developments. The move by both countries underscores a growing willingness to experiment with non-traditional fiscal tools to manage inflation in politically charged environments.