Japan weighs spending of $33B on measures to fight inflation -sources

A customer looks at items at a shop in Tokyo, Japan, March 24, 2023. REUTERS/Androniki Christodoulou/File photo

TOKYO  –Japan‘s government is considering spending about $33 billion for payouts to low-income households and an income tax cut in a package of measures to cushion the blow to households from rising living costs, three government officials told Reuters on Wednesday.

The spending, currently estimated around 5 trillion yen ($33.37 billion), will include a blanket, one-off income tax cut worth 30,000 per person and residential tax cut worth 10,000 yen respectively, which will be implemented in June 2024, a draft of the plan obtained by Reuters showed.

The spending plan, to be formally decided by Prime Minister Fumio Kishida’s cabinet on Nov. 2, also features payouts to low-income households, the officials said, confirming a report by the Nikkei newspaper.

READ: Japan PM plans income tax cut for households, corporate tax breaks

Details on tax cuts will be discussed by the ruling party’s influential tax panel toward the year end, said the officials, who spoke on condition of anonymity as they were not authorized to speak publicly.

Deputy Chief Cabinet Secretary Hideki Murai told reporters that he was aware of the prime minister’s comment in a TV appearance late on Tuesday that he wanted to achieve wage hikes that offset price increases next year.

Tax revenue has grown this year, and Murai said the prime minister wanted to find a way to return some of that to the public to support households.

“The prime minister will give formal and specific instruction at a meeting tomorrow between officials of the government and the ruling bloc, which will shape up through the ruling party’s tax panel debate,” Murai said.

Inflation, fueled by rising costs of raw materials, has kept above the central bank’s target of 2 percent for more than a year, weighing on consumption and clouding the outlook for an economy making a delayed recovery from COVID-19 scars.

READ: Japan’s core inflation slows below 3% for first time in over a year

With wage rises proving too slow to offset the increase in prices, Kishida has announced a plan to ease the pain by returning to households some of the expected increase in tax revenues generated by solid economic growth.

Kishida is due to discuss wage hikes, among other issues, with auto industry officials when he visits the Japan Mobility Show on Thursday, Murai said.

($1 = 149.8500 yen)