Japan’s prime minister has announced a massive spending package that seeks to counter the nation’s rising inflation.
On Friday, Prime Minister Fumio Kishida said that his government will spend about 71.6 trillion yen ($485 billion) on economic stimulus.
The spending is aimed at helping households and businesses cope with inflationary pressures amid a weak currency.
Kishida said that the economic package is expected to increase Japan’s gross domestic product by 4.6 percent and reduce consumer prices by 1.2 percent over the next year.
It includes a supplementary budget of $29.1 trillion yen ($200 billion) to extend support to households and reduce utility bills.
Kishida said that his government will also provide 100,000 yen ($680) for each pregnant woman.
“We are targeting energy prices, a major factor behind the recent inflation, and curb rising prices in a visible way,” he said at a press conference, Kyodo News reported.
Of the total stimulus package, Kishida said that his government will set aside 6 trillion yen ($40.7 billion) for energy-related measures and extend support worth 45,000 yen ($305) to each household.
The monthly utility bill for an average household will be lowered by 5,000 yen ($33.90) from January next year.
Household electricity bills will be reduced to 7 yen ($0.05) per kilowatt-hour, while companies will receive a 3.5 yen per kilowatt-hour subsidy.
The government will also provide a subsidy of 30 yen ($0.20) per cubic meter of consumption for city gas charges and extend current subsidies for oil wholesalers beyond December.
The economic stimulus was announced following the Bank of Japan’s (BOJ) decision on Friday to keep its interest rates below zero despite the depreciation of the yen, which reached 32-year lows this month.
Japan is the only major economy to maintain low-interest rates amid rising inflation.
Kishida said the government will closely monitor developments in the foreign exchange market in coordination with the BOJ.
“At the same time, we need to strengthen our economy,” he said.
“We have steps to support export-oriented small and midsize companies, encourage firms to transfer higher costs, and boost inbound tourism.”
Since 2016, Japan’s central bank has maintained its key interest rate at negative 0.1 percent.
On Friday, the Policy Board of the BOJ decided to keep the short-term policy interest rate unchanged, at 0.1 percent.
The BOJ said it remains committed to keeping 10-year Japanese government bond yields around zero percent by purchasing a “necessary amount” of such bonds without setting an upper limit.
“The bank will offer to purchase 10-year government bonds at 0.25 percent every business day through fixed-rate purchase operations unless it is highly likely that no bids will be submitted,” the bank said.
Japan’s move to keep interest rates low is in stark contrast to other major central banks around the world that are desperately raising rates.
Just a day earlier, the European Central Bank announced another big rate hike of 75 basis points.
In the United States, the Federal Reserve has raised its benchmark interest rate from almost zero at the beginning of the year to a range of 3.0–3.25 percent, which is its highest level since 2008.