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Japan is expected to announce an economic stimulus package on Friday that, according to local media, could be worth just $200 billion to cushion the impact of inflation and the weakness of the yen.
Prices are emerging in the world’s third-largest economy in 8 years, though its 3% inflation remains below the breakneck levels seen in the United States and elsewhere.
The yen has also lost more than 20% of its price against the dollar this year, prompting the government to interfere at least once in recent weeks, with new measures to prop up the currency suspect but shown through the government.
Details of the stimulus spending will be announced later in the day, with public broadcaster NHK and other media saying it will be more than 29 trillion yen (about $200 billion).
The plans come with measures for families with electricity bills, which have skyrocketed since Russia’s invasion of Ukraine, and to inspire wage growth.
Japan, which has one of the highest debt-to-GDP ratios in the world, has already pumped billions of dollars into its economy during the two years following the recovery from the Covid-19 pandemic.
The main driving force behind the yen’s sharp decline is the contrast between Japan’s long-standing financial easing policies, designed to inspire sustainable growth, and competitive interest rate hikes in the United States.
The Bank of Japan is expected to adopt its ultra-dovish stance in a policy move on Friday, despite rising tension to replace its strategy as the yen falls.
“It is understandable that the government is now pronouncing additional stimulus measures, as the Japanese economy faces weak demand due to emerging prices,” Yoshiki Shinke, lead economist at the Dai-ichi Life Research Institute, told AFP.
That’s “unlike in the U. S. , where demand is strong, where the Federal Reserve needs to calm inflation,” he said.
“It is up to Japan to raise rates to curb inflation, for that reason,” Shinke predicted.
KH/KAF/CWL