By Leika Kihara and Kaori Kaneko
TOKYO (Reuters) -Japan’s junior coalition partner Komeito will call on Monday for emergency measures to cushion people against the economic blow from rising prices of energy and food, the party’s leader, Natsuo Yamaguchi, said on Friday.
The proposal will include a call to expand and extend the duration of a gasoline subsidy for oil distributors, as well as other steps to ease the pain on companies and households hit by soaring raw material costs, he said.
While the government can tap some of the 5.5 trillion yen ($45 billion) in reserves set aside under the fiscal 2022 budget, it needs to be ready to top up funding to deal with what could be Japan’s “worst post-war crisis,” Yamaguchi said.
“In the proposal, we’ll urge the government to look into compiling an extra budget” to fund the spending, he told Reuters in an interview.
“As we focus on how best to protect people’s livelihood, an extra budget should be on the table,” Yamaguchi said, when asked whether the government should pass an extra budget through the current parliament session ending in June.
The proposal by Komeito, which is a coalition partner of Prime Minister Fumio Kishida’s Liberal Democratic Party (LDP), will likely be incorporated into the government’s relief package expected to be compiled next month.
Soaring energy and commodity prices, blamed partly on the war in Ukraine, are clouding the outlook for Japan’s economy, which is only just recovering from the damage done of the coronavirus pandemic.
Some analysts say the yen’s recent declines could inflict more damage to the economy by inflating the cost of imports.
Yamaguchi, however, said Japan “doesn’t need to worry too much” about the weak yen as an imminent threat to the economy.
On monetary policy, Yamaguchi urged the Bank of Japan to maintain its massive stimulus programme “for a bit longer” to ensure a solid recovery in the economy.
Financial institutions have seen deposits surge and aren’t necessarily seeing earnings worsen, he said, when asked about concern the BOJ’s prolonged easing was hurting bank profits.
“The current cost-push inflation isn’t a very good thing for the economy,” he said. “Responding to this with an interest rate hike could weaken Japan’s economic strength.”
Markets are on the lookout for clues on who could succeed Haruhiko Kuroda as next BOJ governor when his term ends in April next year – a choice Kishida will likely make if he stays in power after an upper house election scheduled this summer.
Once Japan emerges from the pandemic, the government can focus on Kishida’s flagship agendas such as promoting a carbon free society and creating a new-style capitalism focusing on wealth distribution, Yamaguchi said.
“Someone who has the ability to make decisions that help promote these efforts would be a desirable candidate” to be the next BOJ governor, he added.
($1 = 121.7100 yen)
(Reporting by Leika Kihara and Kaori Kaneko; Editing by Clarence Fernandez, Chizu Nomiyama and Paul Simao)
