The government has decided to use over 2 trillion yen from the fiscal 2022 reserve fund for measures to tackle inflation, according to government sources.
The plan's central pillar is to add 1.2 trillion yen to the extant temporary subsidies for regional development, allowing local governments to establish flexible measures tailored to regional conditions.
The decision will be finalized Wednesday at the earliest at a meeting of the headquarters for comprehensive measures on prices, wages and livelihoods, chaired by Prime Minister Fumio Kishida, the sources said.
Some 700 billion yen of the 1.2 trillion yen earmarked for regional development is expected to be added to a framework set up in September to tackle high prices.
While local governments can use the money to formulate their own measures, the central government will recommend specific projects such as liquefied petroleum gas (LPG), reducing the burden of special high-voltage electricity for factories, and supporting dairy farmers hit by rising feed prices.
The government introduced subsidies for electricity and natural gas starting from January's usage. However, this does not cover LPG, mainly used in rural areas, leading to growing calls within the ruling parties for the fuel to be newly included.
The subsidies can also continue to be applied to projects already recommended by the government, such as measures for public transportation and tourism-related businesses, as well as subsidies for school lunches.
The remaining 500 billion yen of the 1.2 trillion yen will be used to support low-income households, such as those exempt from resident tax, with the government planning to provide 30,000 yen to each family. Local governments will likely be allowed to expand the eligible-household criteria, reducing the subsidy to below 30,000 yen.
Apart from this, the government will provide low-income, child-rearing households with 50,000 yen for each child and substantially increase grants to municipalities to support hospitals that secure beds for COVID-19 patients. The government also will continue holding down the price of wheat that it imports and sells since wheat is affected by overall high prices. A total of about 1 trillion yen is expected to be allocated for these measures.
Measures to tackle high prices are the government's top priority in the run-up to unified local elections in April, and the scale of the measures may be further expanded.
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