Japan to Announce $200-B Spending Package to Alleviate Inflation Effects

Japan is set to reveal a spending package of more than $200 billion that will cover plans to curb electricity bills that would alleviate inflation for 2023 while maintaining the low-interest rates of the central bank.

Japan’s Prime Minister, Fumio Kishida’s administration has promised a spending package for this month to soften the blow from increasing food and fuel prices.

Kishida is predicted to announce a spending package of $200 billion or approximately 29 trillion yen according to his government officials.

This package would include subsidies to help with household electricity bills by around 20% for January to September of 2023.

“Spending will be between 26 trillion and 30 trillion yen, probably much closer to 30 trillion yen,” said a ruling Liberal Democratic Party official.

Analysts predict the subsidies to lower core consumer inflation which has gone past the 2% target of the central bank for six consecutive months in September, early next year.

“Of components that make up the consumer price index, the subsidies would affect electricity and gas bills. Technically, they will push down Japan’s inflation rate in January-March,” mentions Daiwa Securities analysts.

Japan’s consumer inflation is speeding to an estimated 3.2% in December and with the subsidies, this is expected to slow to 1.7% by March according to Daiwa analysts.

The details of the spending package are reported to not be announced yet due to the Bank of Japan needing time to integrate inflation forecasts and fresh growth.

This spending can possibly push the government to issue more bonds and further aggravate the finances of Japan.

Source: Inquirer