Prime Minister Shinzo Abe’s Cabinet endorsed on Friday a ¥3.12 trillion extra budget aimed at reviving domestic demand stunned by the April 1 consumption tax hike and weaker yen.
To shore up flagging private spending, the stimulus package includes ¥1.19 trillion to provide subsidies to offset rising fuel costs and help regions outside big cities take economic revitalization measures.
The administration mapped out its latest stimulus package on Dec. 27. The extra budget, which is considerably smaller than the previous one, will be enacted when the Diet opens for business later this month.
By using unspent money from the fiscal 2013 budget and tax revenue from the fiscal 2014 ending at the end of March, the administration will finance the supplementary budget without issuing new debt.
Fresh bond issuance in fiscal 2015 will be trimmed by ¥7.57 trillion from the initially budgeted ¥41.25 trillion.
Since taking office in December 2012, Abe has tried to help boost the profitability of export-oriented manufacturers and stock prices through Abenomics, his deflation-fighting strategy involving the “three arrows” of radical monetary easing, fiscal spending and vows of structural reforms.
But the policy mix has faced criticism that it only favors big companies and residents of large cities, prompting Abe to give some attention to more rural areas ahead of nationwide local elections.
The economy shrank for a second straight quarter through September after the first stage of the doubling of the consumption tax lifted the levy to 8 percent from 5 percent.
In addition, the rapid weakening of the yen has been pushing up the cost of imports and inflation at home while dragging down households’ earning power and small and midsize enterprises, particularly those in rural areas.
Under the extra budget, ¥20.5 billion will be used to improve the child care environment and empower women, ¥250 billion to issue regional merchandise coupons or subsidize declining fuel expenses, and ¥170 billion on programs encouraging people to relocate to rural areas.
The administration is earmarking ¥247.1 billion to support farmers and small firms, as well as transport companies that have been beset by higher fuel costs triggered by the yen’s slide but offset by the current plunge in oil prices.
To prop up the tepid real estate sector, ¥209.5 billion will be allocated to resume the Eco-point incentive program that grants points to people who construct or refurbish homes with green features.
The points are exchangeable for a range of green products and gift coupons.
The supplementary budget includes spending for disaster prevention measures and reconstruction work following the fatal mudslides in Hiroshima and the eruption of Mount Ontake last year, and for strengthening competitiveness in the livestock and dairy industries.