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The move is another abrupt measure brought about again to deal with high prices. It is difficult to gain the public’s understanding if measures are launched one after another without carefully examining their effects.
Prime Minister Fumio Kishida has announced that he will reinstate a subsidy program for electricity and gas bills from August to October as an emergency measure against high prices. This is expected to require several hundred billion yen from state coffers.
The reason to bring back the program is that wage increases have not kept pace with inflation, and regional economies and low-income groups have been hit hard, so it is necessary to implement measures with immediate effects to deal with the situation.
The utility bill subsidy program began in January 2023 in response to soaring energy prices due to Russia’s aggression against Ukraine, and it was terminated in May this year on the grounds that prices had stabilized.
A budget of nearly ¥4 trillion has been earmarked for the program so far, but it has been argued that the program has lowered the incentive to conserve energy, which contributes to decarbonization, and that it has distorted the market.
And now, the prime minister abruptly stated that the program will be restarted in August. If a program with many problems is to be resumed, the benefits and adverse effects of such a program should be thoroughly examined.
Currently, international energy prices are not expected to fluctuate significantly. Moreover, there is no sign that the prime minister coordinated in advance with the Economy, Trade and Industry Ministry, which oversees the subsidy program, or the Finance Ministry, which is in charge of budgeting. The prime minister’s change of policy is said to have been met with some voices of puzzlement.
It cannot be helped that the move could be perceived as a policy put in place to boost popularity with the aim of regaining the administration’s approval rating and getting reelected in the Liberal Democratic Party presidential election in September.
Last October, the prime minister also suddenly announced a fixed-amount tax cut. Although the tax cut started in June this year, the Cabinet’s approval rating has remained in a slump. This is probably because the public sees that the effects of the tax cut are not clear and that the measure will only increase the fiscal burden on future generations.
The prime minister has said that he will include new benefits for pensioner households and low-income groups in an economic stimulus package to be formulated in the autumn. The prime minister should refrain from easy handout measures.
Kishida’s political approach lacks the process of thorough discussions with the government and the party to obtain the public’s approval. It is clear that many voters do not view the prime minister’s sudden decisions as evidence of leadership. The prime minister must move away from politics that relies on surprises.
A major factor behind inflation is the depreciation of the yen and appreciation of the dollar, which leads to higher import prices. Simply repeating measures that only deal with symptoms – such as by providing subsidies and benefits will not be a fundamental solution.
Wiser efforts must be introduced in measures to correct the depreciation of the yen, such as a measure to encourage Japanese companies to invest profits earned overseas back into the domestic market and one by the Bank of Japan to be more creative in disseminating information about its future monetary policy.
