Japan PM announces $113 billion economic stimulus
TOKYO, Japan (AFP) – Japanese Prime Minister Fumio Kishida announced on Thursday a stimulus package worth $113 billion aimed at easing the pain from inflation.
Voters in the world’s third-largest economy have been reeling from rising prices since Russia launched its invasion of Ukraine last year, pushing up energy costs and putting pressure on the government.
“We are seeing that the tide is turning from the vicious cycle of deflation -- symbolized by low prices, low wages, and low growth,” Kishida told a meeting where he revealed the size of the package would be around 17 trillion yen ($113.2 billion).
“For the first time in 30 years, we are facing a great opportunity to move to a new economic stage,” he added.
“On the other hand, in the current situation where the rise in wages is not catching up with the rise in prices, it is necessary to support people’s disposable income temporarily so as to avoid moving back to deflation,” he said.
The government was expected to give more details later, but media reports said the program would be worth 37.4 trillion yen when including private sector spending.
The plan involves income and residential tax reductions of 40,000 yen per person, and 70,000 yen cash handouts to low-income households, according to public broadcaster NHK and other local media.
Fuel subsidies will also be extended and there will be funds to promote investments in high-tech areas including the chip and space industries.
The package will likely add to Japan’s debt mountain, which stood at 261 percent of gross domestic product in 2022, one of the world’s highest.
The government has already injected hundreds of billions of dollars into the economy over the past three years since the Covid-19 pandemic.
The stimulus will be submitted to the parliament for approval.
GDP has been slowly picking up speed, with growth of 1.2 percent in April-june, but it is expected to have contracted since.
Japan was for decades beset by deflation but like other economies around the world, prices have risen since the Ukraine war began in February 2022.
Japan, in common with other economies around the world, has seen prices rise on the back of the Ukraine war, while a weaker yen has also made imports more expensive.
Unlike other major central banks, which have raised interest rates, the Bank of Japan has stuck to its ultraloose policy stance in the expectation that inflation will ease.
This has added to pressure on the yen, one of the world’s worst-performing currencies this year.
This week, it slipped to a new year-low against the dollar and its weakest reading against the euro since 2008.
Japan’ s top currency official indicated that the government was ready to intervene in the market to stop the yen’s fall.