October 29, 2022 7:30 am
[Editoriale]The government has decided on a comprehensive economic package focused on mitigating the surge in electricity and gas prices. The scale of government spending is 29 trillion yen and the scale of measures, including related expenditures, exceeds 71 trillion yen. The plan is to issue the second supplementary budget for fiscal year 2022, which will serve as a source of funding, during the current extraordinary session of the Diet.
At the heart of the plan is reducing household energy costs, with the national government paying 7 yen per kilowatt-hour of electricity consumption, with the aim of reducing electricity bills by 20%. It will start early next year and continue until the first half of fiscal year 2023. Town gas subsidizes 30 yen for 1 cubic meter of consumption. LPG, which abounds in rural areas, is said to be helped to streamline delivery by industry players and lead to price restraints.
Subsidies for gasoline and other fuels, which have been in place since the beginning of the year, will be gradually reduced, but will be extended again until the first half of the next fiscal year. The government estimates that these measures will reduce the burden on ordinary households by a total of around 45,000 yen during the first half of the next fiscal year. Consumer prices, excluding fresh food, rose 3.0% year-on-year in September, the first rate of increase in 31 years net of the impact of the consumption tax hike.
What matters is what’s inside. The financial burden of rising prices tends to be heavier for low-income households, and while it may help such households, it will also benefit high-income households and there is a risk that the energy saving momentum being promoted from rising energy prices There is also It is undeniable that it is inconsistent with the government-backed energy saving point measures. If the large-scale import of high-priced fuel continues, the selling of yen and buying of dollars will continue, which could accelerate the depreciation of the yen.
I have the impression that the measures to raise wages, which have been the pillar of the government’s efforts to cope with the surge in prices, are inadequate. In addition to using the tax system to promote wage increases, there are measures such as strengthening the activities of the Fair Trade Commission to pass costs on to small and medium-sized businesses. If Prime Minister Fumio Kishida wants to prove him serious, he will need new measures, such as urging companies that have earned a large amount of surplus due to the weak yen to return the money to their employees and subcontractors.
The reason the countermeasures have become all-encompassing is that the scale has been given priority, saying that “30 trillion yen is the springboard” (LDP General Secretary Hiroshige Seko). The 4 trillion yen rise overnight shows the party’s desire to dispel suspicions of collusion with the Federation of Families for World Peace and Unification (formerly the Unification Church). The Kishida administration, which is facing a decline in approval ratings, appears to have taken advantage of this.
Since most of this will be covered by debt through the issuance of government bonds, it is certain that the financial situation will deteriorate further. Also, have the government and the ruling party seriously discussed the “exit” issue? If prices continue to rise in the first half of the next fiscal year, will the mitigation measures be halted? This could lead to a situation where the government continues to rely on government bonds to cover the deficit. As the Bank of Japan is keeping interest rates low through monetary easing of various sizes, even with accommodative fiscal policy, the chaos of an ultra-short-lived government like the UK has not emerged. You should realize that if it emerged, it would be far from reaching the administration.
