Amid growing concern that inflation will drag down Japan's economic recovery, parliament on Tuesday approved an extra budget designed to assuage the impact of soaring prices for oil and other commodities.
The entire ¥2.7 trillion ($21.13 billion) budget, which will be financed by government bonds, is being directed toward a ¥6.2 trillion emergency relief package put together by the administration of Prime Minister Fumio Kishida to fend off rising prices. The Russia-Ukraine war has intensified global inflation, while the yen’s value has nosedived in the past few months, inflicting the additional burden of higher import costs.
About ¥1.17 trillion of the supplementary budget, for example, will continue to fund a subsidy program for oil wholesalers to curb gasoline, light oil, heavy oil and kerosene prices.
The nation’s average retail price of regular gasoline hit the ¥170 per liter mark in January, the highest level in more than 13 years, but the subsidies have apparently helped lower the price. According to the government, the average gasoline price declined over the past six weeks and stood at ¥168.8 per liter as of May 23.
As for the rest of the extra budget, the government will set aside ¥1.52 trillion — almost all of the remainder — to offer protection against possible emergencies and challenges in the future.
The ¥6.2 trillion relief package also includes ¥1.3 trillion measures for those suffering from soaring prices amid the pandemic, such as a cash handout program through which low-income families with children can receive ¥50,000 for each child. The same amount has been allocated to policies targeting small and midsize firms, such as those reducing interest rates on loans and increasing subsidies for companies that raise wages.
Kishida said the government is taking a two-pronged approach to protecting and growing the economy. The ¥6.2 trillion package is its first step and more of an emergency short-term measure to fight rising commodity prices.
The second-step will be based on the economic agenda that makes up Kishida’s so-called new form of capitalism, with the goal being to spur economic growth. It is expected to be rolled out after the Upper House election in July.
Kishida's Cabinet is expected to approve the new capitalism policies next week.
These include the “Doubling Asset-based Incomes Plan," which aims to encourage people to shift their assets from savings accounts to risk assets such as stocks, as more than a half of the nation’s ¥2 quadrillion in household assets is sitting in savings despite the fact that interest rates have remained very low.
Kishida is also weighing bolstered financial support for midcareer education so that workers can retrain and acquire new skills. The Nikkei business daily has reported that the government will support 1 million workers in switching careers to business areas with high growth potential, such as those that are digital or tech related.
In addition, the Kishida administration intends to boost investment in decarbonization efforts, as well as science to facilitate more innovation. Another major item on the prime minister's agenda is to rev up the startup scene by making it easier for new entrepreneurs to borrow money.
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