Japan Eyes More Stimulus As Record Budget Is Passed

Japan stands ready to take further stimulus steps after its parliament approved a record 107.6 trillion yen state budget for the next fiscal year.

The passage of the budget paves the way for Prime Minister Fumio Kishida's administration to seek yet another spending package to support households facing rising food and fuel bills.

"We will flexibly respond to the needs of further measures, while examining changes in the circumstances," Kishida told reporters.

The government has proposed providing cash payouts to low income pensioners, as well as easing the pain of surging fuel prices through subsidies and tax incentives for consumers.

Finance Minister Shunichi Suzuki also said he would respond as appropriate if additional measures were needed.

"We need to consider compiling an extra budget as well as tapping emergency budget reserves depending on the situation," said Natsuo Yamaguchi, head of Kishida's coalition partner. The annual budget lacked steps to cope with rising prices, he said.

Parliament rapidly approved the budget for fiscal 2022, with lawmakers voicing few complaints about huge spending as the world’s third-largest economy continues to cope with strains from the Covid-19 pandemic.

Shortly before the budget was passed, Kishida’s party's secretary-general, Toshimitsu Motegi, signalled the need for more stimulus, saying the party stood ready to take steps to cushion the country from rising prices.

Opposition party head Yuichiro Tamaki has called for another package, worth 20 trillion yen, on the assumption that Japan is already experiencing stagflation.

Economic growth likely ground to a near halt this quarter as coronavirus curbs and supply disruptions threatened to derail recovery, a recent Reuters poll of economists showed. Japan's huge public debt – twice the size of its US$5 trillion economy – constrains its ability to use fiscal measures. (Reuters)