Japan Cabinet Approves $113 Billion Stimulus to Ease Impact of Inflation

By Megumi Fujikawa

TOKYO--Japan's cabinet on Thursday approved an economic stimulus package worth more than $110 billion, including income tax cuts, part of Prime Minister Fumio Kishida's program to lessen the impact of inflation as his approval rate falls.

Under the package totaling 17 trillion yen ($112.61 billion), the government plans to cut income and resident taxes in June 2024.

The government plans to reduce income tax by Y30,000 and resident tax by Y10,000. Low-income households that are exempt from resident tax will receive subsidies of about Y70,000.

Also, the government will extend until April 2024 subsidies to ease the burden of rising energy prices. The measures require parliamentary approval, which is expected to come this year.

Opposition lawmakers criticized the tax cuts, saying that Kishida is trying to conceal other tax increases to pay for defense costs. Some said the tax cuts should be extended over several years or made permanent instead of taking place only once as Kishida proposes.

Kishida has said the tax cuts should serve as a one-time support for households until wage growth catches up with the pace of price increases and the economy overcomes the negative effects of higher prices.

According to a poll Nikkei and TV Tokyo conducted Oct. 27 to 29, the approval rating for Kishida's cabinet fell to 33%, nine percentage points down from September. The poll also showed that 65% of respondents said tax cuts weren't an appropriate response to inflation.

Japan's consumer prices rose 3% in September from a year earlier. Inflation-adjusted wages have been falling since April 2022.

The package will require about Y13.1 trillion in additional government general-account spending. Adding in the cost of the tax cuts makes the total package size Y17 trillion, the government said. It said the package would have the effect of raising gross domestic product by Y19 trillion.

Write to Megumi Fujikawa at megumi.fujikawa@wsj.com

(END) Dow Jones Newswires

November 02, 2023 04:47 ET (08:47 GMT)

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