Japan readies US$48b package to help with fuel and materials cost spikes

JAPAN'S government will spend US$48 billion to fund subsidies and other measures aimed at cushioning the economic blow from rising fuel and raw material prices caused by the war in Ukraine, a document obtained by Reuters showed on Monday (Apr 25).

Although the planned new spending pales in comparison with last financial year’s extra budget worth 36 trillion yen (S$385.5 billion), it underscores the challenges Japan faces in achieving sustainable growth.

Tokyo is leaning on both generous fiscal stimulus as well as ultra-easy monetary policy to support the economy, a sharp contrast to the shift towards interest rate hikes seen in the United States, Europe and elsewhere.

Prime Minister Fumio Kishida’s administration is expected to announce the relief package on Tuesday.

Of the 6.2 trillion yen in new spending, about 2.7 trillion yen will be funded by an extra budget the government will compile later this year, the document showed. The document did not include details on how the remainder of the spending will be funded.

The package will include 1.5 trillion yen in spending to deal with soaring fuel costs and 1.3 trillion yen for cash payouts to low-income households, the document showed.

The government also plans to spend 500 billion yen on the stable supply of energy, raw materials and food.

The spending will, however, add to Japan’s public debt pile - the heaviest in the industrial world at more than twice the size of the country’s economy. REUTERS