TOKYO (Reuters) – Japan’s record $900 billion budget for the next fiscal year cleared parliament on Tuesday, paving the way for Prime Minister Fumio Kishida’s administration to seek yet another spending package to support households facing rising food and fuel bills.
Even before the passage of the budget for the 12 months starting April 1, Kishida has come under growing pressure from ruling and opposition lawmakers to compile a fresh stimulus package to cushion the economic blow of a rise in household bills blamed on the Ukraine crisis.
“Targeted spending aimed at cushioning the impact from fuel and food price hikes could be positive for the economy,” said Takuya Hoshino, senior economist at Dai-ichi Life Research Institute. “The question is how to ensure effective spending.”
Parliament approved the government’s 107.6 trillion yen ($900 billion) package for fiscal 2022 at the fourth-fastest pace for any annual budget in postwar history. Lawmakers voiced few complaints about huge spending to combat the strain imposed on the world’s third-biggest economy by the COVID-19 pandemic.
The government makes it a tacit rule that any talk of an extra budget – which would be required to finance another spending package – must wait until the full budget passes Japan’s Diet.
With parliament now having approved the fiscal 2022 budget, the government can more openly debate the likelihood of another spending package, analysts say.
Kishida said last week the government is ready to take further steps to cushion the blow from rising energy costs – a nod to the growing political calls for another stimulus package.
Shortly before the budget passage, his party’s secretary-general Toshimitsu Motegi signalled the need for a fresh stimulus, saying his party stands ready to take various steps to cushion the economic blow from rising prices.
Opposition party head Yuichiro Tamaki on Friday called for a fresh stimulus package worth 20 trillion yen on the assumption that Japan is already experiencing stagflation.
Additional spending will likely be financed by issuance of government bonds, Dai-ichi Life’s Hoshino said, a move that would strain Japan’s already tattered finances.
The country’s economic growth likely ground to a near halt this quarter as coronavirus curbs and supply disruptions threaten to derail recovery, a recent Reuters poll of economists showed.
Japan’s huge public debt – twice the size of its $5 trillion economy – constrains the country’s ability to boost fiscal spending to support the economy.
($1 = 119.6000 yen)
(Reporting by Tetsushi Kajimoto; Editing by Kenneth Maxwell)
