Japan PM Kishida signals new spending to soften fuel cost blow

FILE PHOTO: A Japan yen note is seen in this illustration photo taken June 1, 2017. REUTERS/Thomas White
FILE PHOTO: A Japan yen note is seen in this illustration photo taken June 1, 2017. REUTERS/Thomas White

By Leika Kihara and Kantaro Komiya

TOKYO (Reuters) -Japan's Prime Minister Fumio Kishida signalled a fresh stimulus package on Wednesday, saying the government is ready to take further steps to cushion the economic blow from rising energy costs driven by the Ukraine crisis.

While a weak yen is playing some part in driving up import costs in Japan, global commodity inflation is largely to blame for pushing up energy and food bills, Kishida said.

With an upper house election looming later this year, Kishida is under pressure from politicians to ramp up spending to ease the pain for households and retailers still suffering from the impact of the coronavirus pandemic.

"We'll need to take further steps, all available measures, to protect the economy and people's livelihood if the spike in prices continue," Kishida told a news briefing.

The Kyodo news agency reported on Wednesday that Tokyo is considering compiling a fresh stimulus package that includes an extension of temporary subsidies given to energy wholesalers that expire at the end of this month.

The ruling coalition, together with the opposition Democratic Party for the People (DPFP), agreed on Wednesday to look into unfreezing a "trigger clause" that removes the gasoline tax when the price exceeds 160 yen ($1.35) for more than three months, DPFP Secretary General Kazuya Shimba said.

"The government will consider what the most effective steps would be in addressing higher fuel costs, including the possibility of unfreezing the trigger clause," Kishida said.

The clause was frozen in 2011 to secure funds to rebuild Japan after it was hit by devastating earthquake and tsunami.

The government is cautious about unfreezing it for fear of losing tax revenue, and had instead offered temporary subsidies to energy wholesalers to cap gasoline prices. [T9N2U1022]

($1 = 118.1900 yen)

(Reporting by Leika Kihara, Kantaro Komiya; Additional reporting by Yoshifumi Takemoto; Editing by Chang-Ran Kim, Gerry Doyle and Alexander Smith)

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