Gov't OKs ¥13.9 tril extra budget to curb inflation burdens

The Japanese government on Friday approved a 13.9 trillion yen supplementary budget for the fiscal year through March to fund a new economic package aimed at alleviating inflation-driven financial pressures on households.

But Prime Minister Shigeru Ishiba's Liberal Democratic Party and its coalition partner lost their majority in the Oct 27 general election, raising uncertainty over whether the budget will pass smoothly during a 24-day extraordinary Diet session from Thursday.

Last week, the Ishiba administration mapped out an economic package worth 39 trillion yen, featuring subsidies to curb rising energy costs and cash handouts to low-income households, as inflation triggered by a weaker yen continues to weigh on consumer sentiment.

The government intends to finance about half of the extra budget, or 6.7 trillion yen, through new bond issuances, fueling fears that Japan's fiscal health -- already the worst among major advanced economies -- could deteriorate further.

Finance Minister Katsunobu Kato said at a press conference following the cabinet's approval of the supplementary budget, "First of all, we will attempt to ensure economic growth so that we can maintain fiscal consolidation over the medium to long term."

Meanwhile, Shunichi Suzuki, head of the LDP's General Council and Kato's predecessor as finance minister, cautioned against the ballooning extra budget, saying, "Securing sufficient fiscal room is essential in the event of earthquakes or other emergencies."

Yoshihiko Noda, leader of Japan's main opposition party, has called on Ishiba's government to reduce its spending proposal, arguing that the supplementary allocation includes nonurgent items better suited for the initial budget of the next fiscal year.

The latest extra budget was crafted after government data showed Japan's economy expanded for the second consecutive quarter in the July-September period. Inflation-adjusted wages, however, dropped for the second straight month in September.

Concerns linger that consumption, which accounts for more than half of the nation's gross domestic product, could falter again, as price hikes are unlikely to ease soon, with the yen's depreciation driving up import costs for resource-poor Japan.

As a key pillar of the supplementary budget, 3.4 trillion yen is expected to be earmarked for inflation relief, while 4.8 trillion yen is designated for measures such as improving the safety of natural disaster-prone Japan, the government said.

The Ishiba administration also plans to spend 5.8 trillion yen to take necessary steps to push up disposable income across all generations, revitalize regional economies, as well as support artificial intelligence, semiconductor and other emerging industries.

© KYODO