Japanese prime minister Fumio Kishida’s government has approved a hefty economic package that will include government funding of about 29 trillion yen to soften the burden of costs from rising utility rates and food prices.
Inflation has been rising in Japan along with globally surging prices, while a weakening of the yen against the dollar has amplified costs for imports.
The stimulus package includes subsidies for households that are largely seen as an attempt by Mr Kishida to lift his plunging popularity.
His government has been rocked by the ruling Liberal Democratic Party’s close ties to the South Korean-based Unification church, which surfaced after the assassination of former leader Shinzo Abe in July.
“We will make sure to deliver the measures to everyone and do our utmost so that people can feel supported in their daily lives,” Mr Kishida said after preliminary approval of the package earlier in the day.
Japan has stuck to using fiscal measures, or government spending, to counter current economic challenges.
While central banks around the world are raising interest rates aggressively to try to tame decades-high inflation, Japan’s inflation rate is a relatively moderate 3% and the greater fear is that the economy will stall, not overheat.
The Bank of Japan, which has kept its benchmark rate at minus 0.1% since 2016, kept its longstanding lax monetary policy at a policymaking meeting that wrapped up on Friday.
In doing so, it runs the risk of seeing the yen weaken further since the US Federal Reserve is still raising rates, which tends to push the dollar higher. That in turn will raise prices in Japan since it imports much of what it consumes.
The overall size of the package, including private-sector funding and fiscal measures, is expected to amount to 71.6 trillion yen, Mr Kishida said.
The plan includes about 45,000 yen subsidies for household electricity and gas bills and coupons worth 100,000 yen for women who are pregnant or rearing babies.
The 29 trillion yen spending package will be part of a supplementary budget that still must be approved by the parliament.
Mr Kishida vowed to compile and submit a budget plan and get it approved as soon as possible.
His support ratings have sunk since July amid public criticisms over his Liberal Democratic Party’s longstanding cosy ties with the Unification Church, which is accused of brainwashing adherents into making huge donations, causing financial hardships and breaking up families.
An LDP internal survey showed about half of its 400 legislators were tied to the church, though not as followers.
Mr Kishida’s economy minister, Daishiro Yamagiwa, was obliged to resign earlier this week because of his ties with the church and his failure to explain them.
He was replaced by former health minister Shigeyuki Goto.
The hefty spending package will require issuing of more government bonds, further straining 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, or more than 200 per cent of the size of its economy.