Japan's govt backs $19 bn to dampen Iran war impact

Tokyo: Prime Minister Sanae Takaichi’s government backed on Wednesday $19 billion in additional spending to help Japanese households struggling with soaring everyday costs driven by the Iran war.

The budget could reportedly be passed as soon as Friday in the legislature that is dominated by the ruling Liberal Democratic Party and allies of Takaichi, who said previously the money would go toward easing petrol, electricity and gas costs.

The extra budget was “decided” at a cabinet meeting, the prime minister’s office said on its website.

Top government spokesman Minoru Kihara told reporters at a news conference the cabinet had allocated 3.1135 trillion yen ($19 billion).

That includes 2.5 trillion yen for a newly established “contingency reserve” for the situation in the Middle East, he said.

“Amid ongoing uncertainty in the situation in the Middle East, we have formulated this budget from the standpoint of minimising risk,” Kihara said.

He added that the budget would allow for a “robust financial readiness” and that the government would closely monitor future price trends “so that the daily lives of the public and economic activity are not disrupted”.

In May, leading potato chip maker Calbee unveiled a new grey packaging for 14 product lines, swapping its signature orange-and-yellow packets, with local media attributing the move to an ink shortage linked to the Iran war.

Takaichi said the government expects to secure a stable supply of oil until next spring.

She added that alternative supplies for naphtha, an oil byproduct used in a wide range of industries, from outside the Middle East have recovered to more than 80 percent of previous levels.

Japan’ central bank hiked its inflation forecasts in April and cut its growth projections after the Iran war sent oil prices soaring.

Kihara said the supplementary budget would be covered by deficit-financing bonds.

However, total bond issuance will not rise, he added, as some debt authorised in the previous fiscal year will not be issued due to expected tax revenues, among other factors.