Japan's Cabinet is set to approve Tuesday a 2.7 trillion yen ($21 billion) draft extra budget for fiscal 2022 to ease the pain of surging energy, food and other prices stemming from Russia's invasion of Ukraine.
Once it clears parliament, the supplementary budget for the year that started in April will be used to finance part of a 6.2 trillion yen relief package compiled in late April.
About 1.5 trillion yen of the extra budget will be spent to replenish reserve funds which the government is using to implement some of the measures in the relief package such as subsidies for oil wholesalers to bring down retail gasoline prices and cash handouts of 50,000 yen per child for low-income households.
The government said it needed to draw on the reserve funds, which can be spent without parliament approval, to swiftly respond to sharp price rises.
A record 107.60 trillion yen budget for fiscal 2022, enacted in late March, includes 5.5 trillion yen in reserve funds to cope with the COVID-19 pandemic and other emergency purposes.
The remaining 1.2 trillion yen of the extra budget is earmarked to extend the current subsidy program for oil wholesalers until the end of September.
Fuel prices have been rising as the global economy recovers from the coronavirus pandemic fallout, but the pace accelerated on supply concerns following Russia's invasion of Ukraine in late February.
Prices of grain such as wheat, of which Russia and Ukraine are major producers, have also risen sharply.
The ruling Liberal Democratic Party and its junior coalition partner Komeito are aiming to start Diet debate on the draft extra budget on May 25 to enact it by the end of this month, a coalition source said. The current regular Diet session ends on June 15.
The supplementary budget is expected to entail a new government bond issuance, causing further deterioration to the nation's fiscal health.
The balance of long-term Japanese government debt stood at a record 1,017.1 trillion yen at the end of fiscal 2021.