WNAM REPORT: Japan’s government on Monday submitted to parliament a draft supplementary budget for fiscal 2024 worth 13.9 trillion yen ($92.7 billion) to finance a new economic package aimed at easing inflation-driven financial pressures on households. But it remains to be seen whether the spending plan will pass smoothly during the ongoing extraordinary Diet session through Dec. 21 as Prime Minister Shigeru Ishiba’s Liberal Democratic Party and its coalition partner, the Komeito party, lost their majority in the House of Representatives in the general election in late October.
With the supplementary budget for the current fiscal year through March, Ishiba’s administration seeks to implement the economic package totaling 39 trillion yen, featuring subsidies to curb higher energy costs and cash handouts to low-income households, as inflation continues to weigh on consumers.
“The swift enactment of the supplementary budget is needed so people can feel safe and secure,” Finance Minister Katsunobu Kato said during a parliamentary speech.
The government plans to finance about half of the extra budget, or 6.7 trillion yen, through new bond issuances, raising fears that Japan’s fiscal health, already the worst among major advanced economies, could deteriorate further.
The submission of the draft budget comes as consumer spending, which accounts for more than half of the nation’s gross domestic product, may weaken again amid rising prices, with the yen’s depreciation driving up import costs for resource-poor Japan.
Last week, government data showed Japan’s inflation-adjusted wages — a barometer of consumer purchasing power — remained flat in October compared with a year earlier.
The government plans to allocate 3.4 trillion yen for inflation relief and 5.8 trillion yen on steps to stimulate the economy, including providing support for artificial intelligence, semiconductor and other growing industries.
As another key pillar of the package, 4.8 trillion yen is expected to be spent on ensuring public security and safety.
To secure support from opposition parties, the ruling bloc has agreed to a proposal by the small but increasingly influential Democratic Party for the People to increase the income tax exemption threshold, currently set at 1.03 million yen.
Meanwhile, the Constitutional Democratic Party of Japan, the largest opposition force, has called on the government to reduce the spending plan, arguing that the supplementary allocation includes nonurgent items better suited for the initial budget in the next fiscal year.
