The administration of Prime Minister Fumio Kishida on Tuesday compiled a package of new economic measures featuring ¥6.2 trillion in spending to fend off the impact of booming oil and other commodity prices.
With Russia’s invasion of Ukraine and the resulting geopolitical tensions accelerating an existing global wave of inflation that has been seeping into the Japanese economy — a situation compounded by a steep fall in the yen — Kishida is ramping up steps to apparently ease concerns of voters ahead of the Upper House election in July.
“We must prevent soaring crude oil prices and (a wide range of other) price hikes from hindering the recovery of social and economic activities from the pandemic,” Kishida said during a news conference Tuesday.
The prime minister said the government will adopt a two-pronged approach to protecting the economy. The first step is the ¥6.2 trillion package, while Kishida will introduce other measures based on his so-called new capitalism after the Upper House election.
Given that rising gasoline prices are becoming a burden on households, the government will spend ¥1.5 trillion to expand subsidies for oil wholesalers, raising the amount to ¥35 per liter from ¥25, to curb prices at the pump.
The nation’s average regular gasoline price stood at ¥173.5 per liter as of April 18, the highest level in more than 13 years.
Compared with other countries, such as the United States, inflation is yet to become a serious issue in Japan, but prices of daily goods have been increasing and the trend is expected to continue.
A survey by Teikoku Databank Ltd., a Tokyo-based credit research agency, covering 105 food producers showed prices of more than 4,000 products have been raised so far this year, and the price tags of about 2,000 more items will be hiked by July.
The fresh measures will also support low-income families with children through a ¥50,000 handout for each child — for a total cost of ¥1.3 trillion — while another ¥1.3 trillion will be used to lower the interest rate on loans for small and midsize companies struggling with the fallout from the pandemic.
The outlay for the economic measures will be partly covered by ¥1.5 trillion from the fiscal 2022 budget reserve fund and a ¥2.7 trillion extra budget.
The government aims to enact a bill to finance the extra budget during the current parliamentary session, which is scheduled to end June 15.
Initially, Kishida said the government would first tap into the budget reserve to implement the measures in a swift manner, since drafting an extra budget and having it clear parliament takes time.
But the prime minister apparently changed the plan after Komeito, the ruling Liberal Democratic Party’s junior coalition partner, stressed the need for an extra budget to expand the range of measures and spending,
with Komeito seemingly wanting to gain a boost ahead of the Upper House election.
Recent polls have shown that the Kishida administration enjoys relatively high support ratings, but at the same time voters are not particularly happy about the government’s response to rising prices.
According to a phone poll covering 905 people by the Nikkei business daily from Friday to Sunday, 51% of respondents said they did not think the government has been doing an appropriate job in fighting the soaring prices.
Opposition group the Democratic Party for the People has been in talks with the ruling bloc to persuade them to reinstate a trigger clause that would slash gasoline taxes, but the ruling parties have deferred apparently such a decision for the time being.
The tax cut can be implemented if the average price of regular gasoline remains above ¥160 for three consecutive months. But enacting a cut would require a legal amendment, as the policy has been frozen since 2011 in an effort to secure tax revenue for the reconstruction of the Tohoku region following the Great East Japan Earthquake.