Japan should target around 30 trillion yen ($201 billion) for a new economic package to be compiled later this month, a senior ruling party lawmaker said Tuesday as the government aims to help ease the pain of accelerating inflation and support the economy.
Koichi Hagiuda, the policy chief of the Liberal Democratic Party, told reporters after meeting with Prime Minister Fumio Kishida that they agreed that "the size and substance" of the package are important.
Faced with plunging public support, Kishida is scrambling to increase government support for struggling households and make it more visible by reducing energy bills.
Another key feature would be to expand subsidies for small and midsize companies that raise pay, as Kishida attaches importance to wealth redistribution as part of his push for creating a new capitalism.
"The problem is that we haven't seen wage growth (to keep pace with price hikes)," Kishida told a parliamentary session on Tuesday, adding that the new package would aim to strengthen the economy despite inflation and the weak yen.
Russia's war against Ukraine has increased energy, raw material and food prices. Resource-poor Japan has felt the effect magnified by the yen's sharp depreciation as it boosts import costs. The Japanese currency has hit a fresh 32-year low beyond 149 to the U.S. dollar.
Though still slow compared to the United States and Europe, Japan's inflation has accelerated in recent months. Economists expect the world's third-largest economy to show slower growth in July-September than the previous quarter.
The government is facing growing pressure to take steps to ease the pain, while opposition party lawmakers are also putting part of the blame on the Bank of Japan, whose ultralow rate policy has been weakening the yen.
The government plans to start reducing electricity bills as early as January while also seeking a similar program for gas. It will extend existing subsidies for oil wholesalers to lower retail gasoline and kerosene costs beyond the current deadline of December, Kishida has said.
After the package is finalized, the government is expected to submit an extra budget to parliament in November for the current fiscal year through next March.
The compilation process comes as the government will also step up work to draft a state budget for the next fiscal year. A substantial increase in defense spending is expected even as the country has debt more than twice the size of its economy.
In a set of proposals handed to the prime minister, the LDP called for a package that could help Japan overcome what it described as the "national crisis" and bring relief to people in Japan.
It stressed the need to restore the country's earning power at a time of yen weakness, ensuring a recovery in inbound tourism hit by the COVID-19 pandemic and promoting farm exports.