The Japanese Government on Friday approved a hefty economic package that will include government funding of about 29 trillion yen ($200 billion) to cushion the economy from the burden of costs from rising utility rates and food prices, reported Associated Press. Prime Minister Fumio Kishida’s party and Cabinet is expected to approve the plan the day after a morning economic policy meeting. The Prime Minister is set to give a news conference in the evening, the report included.
Along with the global price surge, inflation has been rising in Japan. A weakening of the yen against the dollar has amplified costs for imports.
According to the report the stimulus package includes subsidies for households. This is largely seen as an attempt to lift the plunging popularity of the Prime Minister. Ruling government has been rocked after the assassination of former PM Shinzo Abe, which revealed the Liberal Democratic Party’s close ties to the South Korean-based Unification church.
While the central banks around the world are raising interest rates, this stimulus plan is an indication that Japan will stick to using fiscal measures to counter current economic challenges. Japan’s inflation rate is a relatively moderate 3 per cent and the greater fear is that the economy will stall, not overheat, the report said.
In the policy meeting on Friday, the Bank of Japan continued its longstanding lax monetary policy which has been keeping its benchmark rate at minus 0.1 per cent since 2016, the report added.
The overall size of the package, including private-sector funding and fiscal measures, is expected to amount to 71.6 trillion yen ($490 trillion), Kishida said according to AP. Fiscal spending will be 39 trillion yen ($270 billion). The package includes about 45,000 yen ($300) subsidies for household electricity and gas bills and coupons worth 100,000 yen ($680) for women who are pregnant or rearing babies. This package will be part of a supplementary budget that must be approved by the parliament.
Prime Minister Kishida has vowed to compile and submit a budget plan and get it approved as soon as possible. His support ratings have declined since July amid public criticisms over LDP’s relation with the Unification Church, which is accused of brainwashing adherents into making huge donations, causing financial hardships and breaking up families, AP reported.
According to AP, this package will require issuing more government bonds, which will further strain Japan’s worsening national debt that has piled up as the government spent heavily to counter the impact of the pandemic. Japan now has a long-term debt exceeding 1.2 quadrillion yen ($8.2 trillion), more than 200% of the size of its economy, AP report added.