Japan is out spending. Bond markets seem nervous about picking up the tab.

Subscribe to enjoy similar stories. TOKYO—Japanese Prime Minister Sanae Takaichi says her $135 billion stimulus package will prop up the world’s fourth-largest economy. Some see a danger in swelling a debt pile that is already one of the largest globally.

But many economists say fears of a fiscal unraveling are overblown. Takaichi, who took power in October, has unveiled a range of new relief measures, such as energy subsidies and a cash handout of 20,000 yen per child, equivalent to $128.73. Her government will also make long-term moves to raise the income tax threshold and abolish a provisional gasoline duty.

Takaichi’s idea is to rely on bond markets to cover 60% of the bill. To spend or not to spend is a conundrum facing governments worldwide. Many pumped money into their economies during the pandemic to keep consumers and businesses afloat amid lockdowns.

But the Covid aftermath featured a sharp rise in inflation that drove up the cost of living, forcing officials to extend support programs or offer new handouts. U.S. debt will be over 100% of gross domestic product this year, with the deficit on course to be one of the biggest in the developed world, according to estimates from the International Monetary Fund.

In the U.K., the government last month unveiled a second consecutive year of hefty tax rises, seeking to reassure investors that it could support ballooning interest payments on government debt. Japan’s debt sits at more than double the size of its economy. For decades, borrowing levels didn’t concern investors much because interest rates were kept virtually zero.