Japan will take “unprecedented” measures to curb rising electricity bills as a weak yen hits households and businesses.
Global recession fears and high inflation pose big risks to the economy, Prime Minister Fumio Kishida told the country’s parliament on Wednesday.
“Rising energy and food prices due to Russia’s invasion of Ukraine, coupled with a weak yen, and the fears of global economic slowdown are big risk factors to Japan’s economy,” Kishida said.
$100 Billion Support
Consumer prices in Japan’s capital Tokyo rose in September at their fastest pace since 2014, government data showed on Monday, highlighting the increasing burden for households from the yen’s plunge to 24-year-lows.
The government will compile another economic stimulus plan by the end of October, including a rare measure to directly ease the rise of electricity prices that are subject to abrupt price flare-ups, Kishida said.
Faced with falling public approval rates, Kishida’s ruling party is considering a fresh spending package worth at least $100 billion to address inflation.
On the weak yen, it is important for Japan to link it to economic revitalisation through a recovery of inbound tourism, bringing companies back to the country and expanding agricultural exports, Kishida said.
When an opposition lawmaker asked about the Bank of Japan’s (BOJ) ultra-easy policy that has fuelled the yen’s decline amid global central banks’ tightening, Kishida said specific monetary policy moves, such as an exit from easing, were up to the BOJ to decide.
Hopes of Tourism Boost
Japan’s services sector activity growth posted a small expansion in September as demand recovered on declining Covid cases and the prospect of easing restrictions on foreign tourism boosted hopes of a stronger economic revival.
PM Kishida pledged this week to raise inbound tourism spending to more than 5 trillion yen ($34.5 billion) a year, hoping to benefit from windfalls brought by the yen’s recent fall to a 24-year low against the dollar.
The final au Jibun Bank Japan Services purchasing managers’ index (PMI) rose to a seasonally adjusted 52.2, returning to growth after posting a contraction of 49.5 in August.
The figure was largely in line with a 51.9 flash reading for September unveiled last month. The 50-mark separates expansion from contraction.
Japan will loosen its border policies from Tuesday next week, dropping a cap on daily arrivals among other rules, as it hopes the yen’s sharp decline against the dollar and other major currencies this year will help lure tourists.
“The announcement that restrictions on foreign tourism will be lifted from October should … help support greater economic activity levels across Japan,” said Joe Hayes, senior economist at S&P Global Market Intelligence, which compiles the survey.
“Yen weakness is also leading to imported inflation and is another reason why the relaxation of travel restrictions will be welcomed,” Hayes added.
The composite PMI, which is estimated by using both manufacturing and services, returned to growth after recording a one-month contraction in August, rising to 51.0 in September from a 49.4 final in the prior month.
- Reuters, with additional editing from Alfie Habershon and Jim Pollard
NOTE: More details were added to this report on October 5, 2022.