‘Deputy Capital’ Bill Passes by Narrow Margin, Diet Closes

Deputy Capital Bill Passes by 2-Vote Margin, Extraordinary Diet Session Closes On the 24th, the law related to the ‘Deputy Capital’ concept, which would replace the functions of the capital during large-scale disasters, passed the Upper House plenary session by a majority of ruling party and other votes (123 in favor, 121 against) and was enacted. The vote took place amid strong opposition from the opposition parties, and the extraordinary Diet session effectively closed on the 25th, the end of the session. 12345

Flag Desecration Law Promulgated, to Take Effect on August 13 The ‘Japanese Flag Desecration Law,’ which Prime Minister Takaichi has advocated since before taking office, was promulgated on the 24th and will take effect on August 13. There are concerns that the definition of punishable acts is vague and may infringe on freedom of expression, making proper legal application a challenge. 67

Revised Imperial Household Law to Take Effect October 24, Revised National Referendum Law Also Passed The revised Imperial Household Law, aimed at securing the number of imperial family members, was promulgated on the 24th and will take effect on October 24. On the same day, the Upper House plenary session also passed and enacted the revised National Referendum Law, which sets procedures for constitutional amendments. 89

U.S. Treasury Demands Yen Depreciation Curb, Urges BOJ to Raise Rates Further In its currency report released on the 23rd, the U.S. Treasury pointed out that the yen’s depreciation is ‘persistent’ and called on the Bank of Japan to further raise interest rates to stabilize inflation expectations. It warned that excessive volatility is undesirable, and exchange rate trends will remain a focus. 10

Out-of-Pocket Maximum for High-Cost Medical Care to Be Raised from August On the 24th, the government decided at a cabinet meeting to revise the high-cost medical care system, which caps out-of-pocket expenses. From August, the monthly maximum will be raised by 4–7% depending on income, while a new annual cap will be introduced to consider long-term treatment patients. 11

Government to Set Up Expert Panel on ‘Quantitative Control’ of Foreign Worker Intake The government has decided to set up an expert panel to consider regulations on accepting foreign workers, possibly within this month. This is a key policy of Prime Minister Takaichi, aiming to formulate a ‘population strategy’ including numerical targets within this fiscal year. Discussions are needed taking into account labor shortages and signs of ‘departure from Japan’ due to the weak yen. 12

Defense Minister Koizumi Explains Need for Nuclear Debate but Emphasizes Adherence to Three Non-Nuclear Principles Defense Minister Shinjiro Koizumi explained at a press conference on the 24th that his repeated references to the need for discussion on nuclear weapons were intended to ‘discuss without excluding any options.’ On the other hand, he repeatedly emphasized that the government’s position of adhering to the Three Non-Nuclear Principles remains unchanged. 13

Prime Minister Takaichi Begins Considering Cabinet Reshuffle and Party Appointments After Diet Session Closes Prime Minister Sanae Takaichi plans to begin considering a cabinet reshuffle and appointments of Liberal Democratic Party executives in August or September, following the effective closure of the extraordinary Diet session. Aiming to recover the declining cabinet approval rating, she seeks to stage a comeback through a renewal of the administration. 14

Generative AI Users Nearly Double from Previous Year, Approaching 59% According to the Ministry of Internal Affairs and Communications’ White Paper on Information and Communications, the percentage of people who used generative AI in fiscal 2025 was 58.8%, approximately double the previous year. It exceeds 90% among teenagers, but remains low compared to the United States, China, and Germany, highlighting challenges for Japan’s digital competitiveness. 15