Prime Minister Fumio Kishida said on Monday that the government’s new economic package is part of a plan to redistribute Japan’s wealth through higher wages and other similar measures aimed at steering the economy past the cost of living crisis to achieve long-term growth. He said it was a thing.
The package, which also aims to address demographic challenges and revitalize the chip sector, is expected to be finalized in October with a supplementary budget to fund it. Kishida said he would formally instruct his cabinet on Tuesday to step up work on developing countermeasures.
Prime Minister Fumio Kishida giving an overview of the government’s new economic measures in Tokyo on September 25, 2023 (Kyodo News)
This policy has five pillars: alleviating the pain of inflation on household finances, promoting further wage increases, increasing investment, addressing the challenges posed by population decline, and ensuring the safety and security of the Japanese people.
Kishida told reporters at the time of the briefing, “The people are struggling to cope with rising prices.Personal consumption and capital investment lack strength and remain unstable.”
Kishida said, “We will take economic measures to appropriately distribute the fruits of growth to the people.”
The total amount to be spent on the package has not yet been determined, but the government faces the difficult task of marking a departure from a period of “crisis mode” spending measures to deal with the coronavirus pandemic and the war against Russia. confronting. Ukraine.
Inflation in Japan has been running at a much slower pace than in the United States and Europe, but the resource-poor country has also seen rising inflation, mainly due to higher prices for imported energy and raw materials.
The government will maintain subsidies designed to lower fuel costs, as rising energy prices due to the weaker yen are putting pressure on household consumption.
The package also aims to help reskill workers and encourage small and medium-sized businesses to raise wages for their employees, with Kishida setting the goal of promoting further wealth redistribution. He describes his approach as “a new form of capitalism.”
Japan is seeking to revamp its once-competitive semiconductor industry and protect its economic security after the coronavirus pandemic exposed the vulnerability of over-reliance on China for semiconductors and other critical components. .
Kishida said the new measures will include measures to encourage investment in strategic areas.
Hiroshige Seko, secretary-general of the Liberal Democratic Party in the House of Councilors, is calling for a policy in the range of 15 trillion ($101 billion) to 20 trillion yen.
He has supported fiscal stimulus and bold monetary easing under former Prime Minister Shinzo Abe’s Abenomics program, which aims to boost the economy.
The Bank of Japan maintains an ultra-low interest rate policy, setting it apart from global banks such as the U.S. Federal Reserve and the European Central Bank, which have raised interest rates to curb soaring inflation.
The recent weakening of the yen reflects policy differences, with Japan now experiencing more than a year of cost-push inflation. Bank of Japan Governor Kazuo Ueda reiterated on Monday that monetary easing is necessary as Japan is at a “critical” crossroads in achieving a virtuous cycle of wage and price growth.
In response to a question about the need to stem the yen’s depreciation, Prime Minister Kishida said Monday’s excessive volatility was undesirable and that currency movements should reflect economic fundamentals.
With the market becoming increasingly wary of the Japanese authorities’ intervention in buying the yen and selling the dollar again, he said, “We will continue to monitor developments in the foreign exchange market with a heightened sense of urgency.”
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