Japan unveils near-term steps to offset hit from rising prices

People buy their lunches from street vendors in front of the headquarters of Bank of Japan in Tokyo, Japan, June 17, 2022. REUTERS/Kim Kyung-Hoon/File Photo

TOKYO  – Japan’s government on Friday unveiled near-term stimulus steps to soften the economic blow of high food and energy prices on low-income households, businesses and farmers.

The move by the government to roll out new and extend existing policies highlights Fumio Kishida’s resolve to tackle the impact of rising cost pressures by providing support to firms and consumers.

“Protecting the lives of people and activity of businesses in the midst of surging global prices is one of the top priorities of the Kishida administration,” Kishida said on Friday at a meeting of a panel tasked with rising prices and wage issues.

As part of the steps, the government will offer 50,000 yen ($350) in financial support to low-income households exempt from paying resident taxes to help them pay for rising costs of electricity, gas and food.

Other steps included an extension of existing subsidies to keep the price of animal feed for livestock and dairy farmers down beyond October, as well as providing support to farmers who made efforts to reduce the use of chemical fertilizers.

The government would also hold off on raising the price of imported wheat it sells to retailers beyond October, essentially making it easier for households to cope with higher commodity costs by reducing pressure on bread and noodle prices.

It would also free up extra funding for a regional subsidy program.

On the energy sector, the government would extend the current subsidies for gasoline and other fuels until the end of December, though it may consider revising the subsidy cap scheme.

It also aims to restart up to nine nuclear power plants during the winter to secure a stable supply of electricity.

Limited economic impact

“This is a package to mitigate the negative impact (of price rises) rather than providing a push-up effect,” said Toshihiro Nagahama, chief economist at Dai-ichi Life Research Institute.

“The push-up effect on gross domestic product is likely to be limited.”

Nomura Research Institute executive economist Takahide Kiuchi estimated about 16 million low-income households would likely be eligible for the 50,000 yen in financial support that the government plans to dole out.

That could push up private consumption by about 225 billion yen, which would correspond to about 0.04 percent of Japan’s annual nominal GDP, Kiuchi added.

“It can’t be said to have a big economic impact.”

($1 = 142.7000 yen)