TOKYO (AP) — Japanese Prime Minister Fumio Kishida’s government on Friday approved a hefty economic package that will include about 29 trillion yen ($200 billion) in government spending to ease the strain of rising utility and food prices.
Rising global prices and a weakening yen have increased the cost of imports and fueled inflation.
The stimulus package includes subsidies for households, which are largely seen as an attempt by Kishida to boost his waning popularity. His government was rocked by the ruling Liberal Democratic Party’s close ties to South Korea’s Unification Church, which surfaced after the assassination of former leader Shinzo Abe in July.
“The economic measures are designed to overcome rising prices and achieve economic recovery,” Kishida said in a news conference. “We will protect people’s lives, jobs and businesses and strengthen the economy for the future.”
Any market reaction to another spate of stimulus was likely factored in earlier in the week as Tokyo stocks fell, with the benchmark Nikkei 225 down 0.9% to 27,105.20.
Japan is sticking to fiscal measures or government spending to counter the current economic challenges. While central banks around the world are aggressively raising interest rates To try to tame decades of inflation, Japan’s inflation rate is at a relatively moderate 3%, and the bigger fear is that the economy is stalling rather than overheating.
The Bank of Japan, which kept its benchmark interest rate down 0.1% since 2016, maintained long-term loose monetary policy at a policy meeting that ended on Friday.
There is a risk that the yen will weaken further as the US Federal Reserve is still raising interest rates, which tends to push the dollar higher. This in turn will increase prices in Japan as it imports a lot of what it consumes.
Kishida said Friday that the government is closely monitoring movements in exchange rates. Japan has spent tens of billions of dollars in market interventions to prop up the yen in recent weeks as the currency fell to a 32-year low of more than 150 yen against the dollar. It was trading near 148 yen to the dollar on Friday. At the beginning of the year it was around 115 yen.
Kishida said the total size of the stimulus package, including private sector financing and fiscal measures, is expected to reach 71.6 trillion yen ($490 trillion).
The plan includes subsidies of about 45,000 yen (US$300) for household electricity and gas bills, and 100,000 yen (US$680) worth of vouchers for women who are pregnant or raising babies.
“We will ensure that the measures are made available to everyone and will do our utmost to make people feel supported in their daily lives,” Kishida said earlier on Friday after the package was provisionally approved earlier in the day.
The 29 trillion yen ($200 billion) spending package will be part of a supplementary budget that has yet to be approved by Parliament.
Kishida promised to draw up a budget plan, submit it and have it approved as soon as possible.
His support ratings have plummeted since July amid public criticism of his Liberal Democratic Party’s longstanding close ties to the Unification Church, which has been accused of brainwashing supporters into making huge donations, causing financial hardship and breaking up families.
An internal LDP poll found that about half of its 400 MPs were attached to the church, albeit not as adherents. Kishida’s economy minister, Daishiro Yamagiwa, was forced to resign earlier this week because he had ties to the church and failed to explain them. He was replaced by former Health Minister Shigeyuki Goto.
The hefty spending package will require more government bond issuance, further weighing on Japan’s deteriorating public debt, which has been piling up as the government spent heavily to counter the effects of the pandemic. Japan now has a long-term debt of more than 1.2 trillion yen ($8.2 trillion), or more than double the size of its economy.