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Politics

Japan enacts $21bn extra budget to tackle surging prices

Funds will contribute to emergency package, including subsidies for oil wholesalers

Japan's Parliament Building in Tokyo, where the House of Councillors passed the supplementary budget with a majority vote following its approval Friday by the House of Representatives.   © Reuters

TOKYO (Kyodo) -- Japan's parliament enacted Tuesday a 2.7 trillion yen ($21 billion) extra budget for fiscal 2022 to tackle recent rising fuel and food prices following Russia's invasion of Ukraine.

The extra budget for the year that started April 1 will finance part of a 6.2 trillion yen emergency economic package formed in late April which includes such measures as subsidies to oil wholesalers to reduce surging retail gasoline prices.

The House of Councillors passed the supplementary budget with a majority vote following its approval Friday by the House of Representatives.

Nearly 1.2 trillion yen will be used to extend the current oil subsidy program to the end of September.

Crude oil prices have been increasing due to supply fears after the war in Ukraine began in late February. Combined with a recent weaker yen against the U.S. dollar, import costs for crude oil nearly doubled in April from a year earlier.

Pushed up by climbing prices of commodities, Japan's core consumer price index, excluding volatile fresh food items, accelerated 2.1% in April from a year earlier, a seven-year high.

As the Japanese government has already decided to use about 1.5 trillion yen from its reserve funds for fiscal 2022 to implement measures in the relief package, such as cash handouts for child-rearing households with low incomes, about the same amount will be replenished with the extra budget.

All of the extra budget will be financed by issuing new government bonds, leaving the world's third-largest economy further from restoring its fiscal health, which is already the worst among major economies.

The initial budget for the current fiscal year totaled a record 107.60 trillion yen, including 5.5 trillion yen in reserve funds to cope with the COVID-19 pandemic and other emergency purposes.

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