Despite rising inflation, the Japanese central bank is sticking to its loose monetary policy. In order to protect the population from high costs, the government has set up a rescue package of almost 200 billion euros. The country, which is already highly indebted, wants to take out more government bonds.
Highly indebted Japan wants to cushion the consequences of rising inflation for the population with an economic stimulus package worth billions. It includes government spending of 29.1 trillion yen (198 billion euros), the Japanese government announced. Including municipal and private sector spending, the package totals as much as 71.6 trillion yen.
Prime Minister Fumio Kishida, who is fighting against falling poll numbers, wants to use the money primarily to finance subsidies for rising electricity bills for households and companies. The government is likely to finance spending with more government bonds, notwithstanding the already high national debt. She intends to present a supplementary budget shortly, which Parliament must adopt.
Rising inflation is hitting Japan at a difficult time as the world's third largest economy, ahead of Germany, is recovering more slowly than other major economies. The situation is exacerbated by the rapid weakening of the yen, as this increases import costs for the country with few natural resources.
According to experts, the yen is also being weighed down primarily by the monetary policy of the Japanese central bank, which, unlike many other central banks, is not fighting inflation in the country. Although this is significantly lower than in many other countries, it is relatively high by Japanese standards.
As expected, the Bank of Japan (BoJ) decided to stick to its previous course of extremely relaxed monetary policy. In addition, the central bank raised the inflation forecast for the fiscal year running until the end of March 2023 from 2.3 to 2.9 percent. At the same time, the economy will only grow by 2.0 percent instead of the previously expected 2.4 percent, it said. The Japanese central bank is thus continuing to resist the trend towards monetary tightening, despite rising inflation. Short-term interest rates are to remain at minus 0.1 percent and long-term rates at around zero.
