Japan to cut power costs amid yen weakness, recession risks, PM says

TOKYO, Oct 5 (Reuters) – Japan will take “unprecedented” steps to rein in rising household and business electricity bills as a weak yen stokes inflation and fears of a global recession loom large risks to the economy, Prime Minister Fumio Kishida told parliament on Wednesday.

The government will draw up another economic stimulus package by the end of October, including a rare measure to directly mitigate rising electricity prices that are prone to price spikes, Kishida said, without giving specific details. .

In the past, the government provided subsidies to fuel wholesalers to keep gasoline prices low, but now policymakers are coming up with new ideas such as making cash payments and providing subsidies to service companies. public to curb price increases.

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Faced with declining public approval ratings, Kishida’s ruling party is considering a new spending package worth at least $100 billion to fight inflation.

“Rising energy and food prices due to Russia’s invasion of Ukraine, coupled with a weak yen, and fears of a global economic slowdown are big risk factors for the Japanese economy,” Kishida said.

Consumer prices in Tokyo, Japan’s capital, rose in September at the fastest pace since 2014, government data showed on Monday, underscoring the growing burden on households from the yen’s plunge to its lowest level. in 24 years, adding to already rising import costs. Read more

To ease the pain of cost inflation for everything from food to energy, Japanese policymakers are urging companies to raise wages, which is essential to start a sustainable growth cycle of higher wages, d rise in consumer spending and business investment.

Four private sector advisers from Kishida’s main economic advisory group have urged the government to pursue a policy aimed at achieving real economic growth of 2-2.5%, to make it easier for big business to implement tax hikes. salary of 2.07% agreed by management and unions. earlier this year.

This would help narrow the output gap from the current 15 trillion yen ($103.85 billion), they said in a recommendation.

Analysts polled by Reuters see the economy growing 1.9% this fiscal year but slowing in 2023 as global demand slows.

Advisers said the government should make pay rises a condition for small businesses to receive government support. They also said smaller companies, many of which are contractors in supply chains, should pass the costs on to their biggest customers.

Kishida said earlier Wednesday that it was important for Japan to link the weak yen to economic revitalization through a recovery in inbound tourism, bringing businesses back to the country and expanding agricultural exports, Kishida said.

When an opposition lawmaker asked about the Bank of Japan’s (BOJ) ultra-loose policy that helped fuel the yen’s decline amid tightening from other global central banks, Kishida said that specific monetary policy measures were up to the BOJ to decide.

($1 = 144.4400 yen)

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Reporting by Kantaro Komiya and Daniel Leussink; Additional reporting by Kaori Kaneko and Tetsushi Kajimoto; Editing by Clarence Fernandez and Kim Coghill

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