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

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.

Recently, inflationary pressures have been building. That is unsettling bond markets which see a government spending increase at a time when Japan’s central bank is considering an interest-rate hike, possibly as soon as this month.

Those concerns came to a head in recent weeks. On Monday, the yield on benchmark 10-year government bonds reached 1.965%, the highest level in over 18 years.

“The key question is whether this yield increase signals market anxiety or heightened inflation expectations," said Takuya Hoshino, an economist at Dai-Ichi Life Research Institute. “For now, I believe the concern is less about the government’s ability to repay debt."

Stefan Angrick, of Moody’s Analytics, suggests investors are wrong to fixate on the headline figure of 18.3 trillion yen for the extra budget. That’s because it’s roughly the same size as the fiscal packages of the past three years when measured against the overall size of Japan’s economy, he said.

One-off measures such as supplementary budgets don’t fundamentally reverse the trend of fiscal contraction, he said, especially if spending happens in the context of Japan’s government deficit narrowing from 10% of GDP to effectively 0%.

“This is a byproduct of how Japan’s fiscal framework responds to inflation-key sources of revenue are pinned to nominal yen amounts, so even modest inflation raises the effective tax rate, while spending formulas don’t adjust," he said.

However, others—including opposition parties—see the market moves as an acute sign of risk.

Yoshihiko Noda, leader of the opposition Constitutional Democratic Party of Japan, said in a parliamentary session that markets are “raising an alarm against reckless fiscal spending, including this latest economic package."

He warned that Japan could face a crisis similar to the “Truss moment" in the U.K. in 2022, caused by then-Prime Minister Liz Truss’s plan for big tax cuts, which led to a sudden spike in gilt yields and a plunge in the pound.

The yen weakened to near 157.90 against the dollar in late November before recovering to around 155.20 Monday.

Fitch Ratings said the size of Japan’s government debt is a significant weakness. The country’s growth outlook is also subdued, and its population is getting old. It said a significant loosening of fiscal policy could stifle any improvement in Japan’s debt-to-growth ratio, posing a risk to its sovereign credit score.

Other analysts decried the trend of Japanese governments using out-of-cycle budgets. In principle, such budgets should happen only at urgent moments like a sharp economic downturn or natural disasters.

“Expanding the size of the initial budget carries the risk of being perceived as abandoning fiscal consolidation efforts," said NLI Research Institute economist Taro Saito.

“If the need to compile wasteful supplementary budgets is to be avoided, even with an expanded initial budget, it can be evaluated as a responsible proactive fiscal policy."

Write to Megumi Fujikawa at megumi.fujikawa@wsj.com