Japan s ruling coalition agreed Wednesday to come up with a fresh stimulus package to cushion the economic blow of surging fuel and grain prices caused by the war in Ukraine.
The Prime Minister Fumio Kishida, who heads the ruling Liberal Democratic Party LDP, said the government would consider an additional package as prices rise and the Ukraine crisis heightens uncertainty over the outlook, according to Natsuo Yamaguchi, leader of the LDP's ruling coalition Komeito.
Yamaguchi told reporters after meeting the prime minister that the economic package needed to be put in place.
The war in Ukraine has triggered a rise in fuel and raw material costs which have pushed up the cost of imported goods in a blow to Japan's fragile economy.
Even before Tuesday s parliamentary approval of a record state budget for the 2022 fiscal year, Kishida was under pressure from politicians to increase spending ahead of an Upper House election scheduled for this summer.
In addition to that, more spending will boost Japan's already huge public debt and keep the country reliant on government support, even as many advanced nations wean their economies off the measures deployed during the COVID 19 crisis.
Kishida will instruct his Cabinet this month to compile the package, and he will likely tap 5.5 trillion $45.41 billion in reserves set aside under the fiscal 2022 budget, instead of compiling an extra budget, the Nikkei paper said Wednesday.
Yamaguchi said that Komeito wants the government to use not just the reserves but additional funds through an extra budget.
The stimulus package could come in two stages, with the first funded by reserves and the second by an extra budget that will pass parliament after the election, said Toru Suehiro, senior economist at Daiwa Securities.
The total size of the package could be close to 20 trillion, he added.