TOKYO (AP) — Japan’s Cabinet has approved a hefty economic package including 29 trillion yen ($200 billion) in government spending to counter the blow to household budgets from inflation, signaling that the greater concern of its policymakers is that the economy will stall, not overheat.
While central banks around the world are raising interest rates aggressively to try to tame decades-high inflation, with its own inflation rate near 3%, Japan has stuck mainly to using fiscal measures, or government spending, to counter that challenge.
The Bank of Japan underscored that when, wrapping up a policy meeting Friday, it stuck to its longstanding policy of keeping its benchmark interest rate at minus 0.1%.
The Federal Reserve has been aggressively raising borrowing costs to combat chronic inflation, raising interest rates five times this year. It’s set to do so again next week and in December, while warning that the hikes will likely bring higher unemployment and possibly a recession.
In a televised news conference, Prime Minister Fumio Kishida said the overall size of the stimulus package, including private-sector funding and fiscal measures, is expected to amount to 71.6 trillion yen ($490 billion) and to boost economic growth by 4.6%.
The 29 trillion yen ($200 billion) spending package will be part of a supplementary budget that still must be approved by the parliament. It includes about 45,000 yen ($300) subsidies for household electricity and gas bills and coupons worth 100,000 yen ($680) for women who are pregnant or rearing babies.
Kishida vowed to compile and submit a budget plan and get it approved as soon as possible.
The stimulus package includes subsidies for households that are largely seen as an attempt by Kishida to shore up his sagging popularity. His government has been rocked by the revelation of close ties between the ruling Liberal Democratic Party and the South Korean-based Unification church that surfaced after the assassination of former leader Shinzo Abe in July.
Shares were mostly lower in Asia on Friday after a mixed session on Wall Street, where tech sector losses offset gains in other parts of the market.
Tokyo’s benchmark slipped as the government was preparing about $490 billion in stimulus spending to help the world’s No. 3 economy cope with inflation. As expected, the Bank of Japan wrapped up a policy meeting by keeping its ultra-lax monetary policy unchanged even as it forecast higher inflation.
The Nikkei 225 index lost 0.5% to 27,210.03 while the Hang Seng in Hong Kong sank 2.3% to 15,069.69. The Shanghai Composite index shed 0.8% to 2,958.25.
The Kospi in Seoul declined 0.4% to 2,278.64. Australia’s S&P/ASX 200 dropped 0.8% to 6,788.00.