Japan spends over 100 billion USD to help people deal with inflation

Japanese authorities will cut income taxes and energy subsidies to ease the impact of rising living costs.

Japanese Prime Minister Fumio Kishida said on November 2 that the government will spend more than 17 trillion yen ($113 billion) on a package of measures to ease the economic impact of inflation. The new policies include income tax cuts and energy subsidies.

To implement the package, the government will draft a supplementary budget of 13.1 trillion yen for the current fiscal year, Kishida told reporters. Including government-guaranteed loans and local government spending, the package could total 21.8 trillion yen.

"The Japanese economy is seeing a great opportunity to enter a new phase, for the first time in three decades, when it escapes the deflationary spiral. That is why we need to help businesses increase profits and revenue, and thereby raise wages," Mr. Kishida said at a meeting with officials today.

People shop at a store in Tokyo (Japan). Photo: Reuters

Inflation in Japan has been above the central bank's (BOJ) 2% target for more than a year, weighing on consumption and the outlook for an economy that is slowly recovering from the pandemic. Inflation here is mainly due to rising raw material costs.

Inflation has hurt Mr Kishida's approval ratings. The prime minister is also under pressure to ease the impact of rising living costs. Current wage increases are not enough to offset rising prices.

Analysts also doubt the new package will have a significant impact on consumption and economic growth in Japan. Takahide Kiuchi, a former BOJ official, estimated that the measures would only add 0.19% to Japan's GDP this year.

Japan grew 4.8% in the second quarter, its fastest pace in more than two years, as the end of pandemic lockdowns boosted consumption. But a fall in real wages in July cast doubt on the BOJ’s forecast that domestic demand will sustain the recovery.

Ha Thu (according to Reuters)

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