Shigeru Ishiba asks ministers to craft economic package to cushion inflation impact

Japanese Prime Minister Shigeru Ishiba said he has asked ministers to formulate an economic relief package to ease the bite of inflation.

“We would need to support people suffering from rising costs right now until a positive growth cycle with wage increases outpacing inflation and driving capital expenditures is established,” Ishiba said Friday in his first policy speech to parliament as the country’s prime minister, according to a translation by Reuters.

Local media reported earlier that Ishiba also plans to compile a supplementary budget, which will fund the relief package after the lower house elections set for Oct. 27.

The support measures would include subsidies to low-income households and significantly larger grants to local governments, Ishiba said in the speech.

On Monday, just three days after being elected as head of Japan’s ruling party, the new prime minister set the date for the snap election. The election for the lower house of parliament is now set to take place a year before it’s due.

Ishiba was heckled throughout his speech on Friday.

During his speech, gains in Japan’s Nikkei 225 narrowed to 0.09% while the broad-based Topix was up 0.36%. Benchmark 10-year Japanese government bond yields rose by 0.013 ticks. Yields rise when bond prices fall. 

The Japanese yen strengthened further trading around 146.01 against the U.S. dollar.

The former defense minister, who won a closely fought leadership race last week, was confirmed as prime minister by parliament on Tuesday. He now faces the challenging task of leading an economy in precarious transition from years of stagnation.

The Bank of Japan has embarked on a campaign to normalize monetary policy as inflation reaches its 2% target. But policymakers contend with a public no longer used to rising prices after years of deflationary pressures.

The Japanese government had sought to trim energy subsidies which work against its decarbonization efforts as the country continues to rely on fossil fuel imports. But it extended subsidies that were meant to expire in May as the country saw record heat this summer and a weak yen made energy imports even more expensive. Those extended subsidies are due to expire this month.

During his election campaign, Ishiba had vowed to reduce the burden on households suffering from rising living costs and showed intentions to boost rural revitalization, as Japan’s countryside suffers from a broader demographic crisis and an aging population.

On Tuesday, the 67-year-old veteran politician named a mix of rivals and allies to his cabinet in a bid to bring political reforms to the Liberal Democratic Party. The ruling party has been dogged by corruption scandals which have divided the party.

Ishiba has long been a critic of former Prime Minister Shinzo Abe and his legacy of “Abenomics,” commonly defined by loose monetary policy, fiscal stimulus and structural economic reforms such as tax cuts. 

In the run up to the election, he said he supported increasing taxes, endorsed the Bank of Japan’s policy of steadily raising interest rates and voiced concerns about the yen’s continued depreciation.

But on Wednesday, he told reporters that the current economic conditions do not support an additional rate hike. The yen weakened in its largest single-day decline since June 2022.