Japan Approves Over $110 Billion Stimulus Package

Japan's cabinet has given approval to an economic stimulus package worth more than $110 billion in efforts to counter the impact of inflation and improve Prime Minister Fumio Kishida's declining approval ratings. The package, totaling 17 trillion yen ($112.61 billion), includes measures such as income tax cuts and subsidies for low-income households.

Income Tax Cuts and Resident Tax Reductions

As part of the stimulus package, the Japanese government plans to implement income tax cuts and resident tax reductions in June 2024. Income tax will be reduced by Y30,000, and resident tax will be decreased by Y10,000. Additionally, low-income households exempt from resident tax will receive subsidies of approximately Y70,000.

Extended Energy Price Subsidies

The government also intends to extend subsidies to ease the burden of rising energy prices until April 2024. These measures are expected to receive parliamentary approval within this year.

Opposition Criticism and Concerns

However, opposition lawmakers have criticized the tax cuts, claiming that Kishida is attempting to mask other tax increases associated with defense costs. Some argue that the tax cuts should be extended over multiple years or made permanent instead of being a one-time event as proposed by Kishida.

Kishida's Rationale for Tax Cuts

Kishida justifies the tax cuts as temporary support for households until wage growth catches up with the pace of price increases and the economy overcomes the negative effects of higher prices.

Declining Approval Rating and Public Opinion on Tax Cuts

According to a recent poll conducted by Nikkei and TV Tokyo, the approval rating for Kishida's cabinet has fallen to 33%, down nine percentage points from September. The poll also reveals that 65% of respondents believe that tax cuts are not an appropriate response to inflation.

Economic Impact and Package Details

Japan's consumer prices rose by 3% in September compared to the previous year, while inflation-adjusted wages have seen a continuous decline since April 2022. The economic stimulus package will require approximately Y13.1 trillion in additional government general-account spending. When factoring in the cost of the tax cuts, the total size of the package amounts to Y17 trillion, with an estimated increase in gross domestic product of Y19 trillion.