Japan allots 388 billion yen from reserves to ease US tariff hit


[TOKYO] Japan’s government approved a plan to draw 388 billion yen (S$3.5 billion) from reserve funds to support businesses and households impacted by US tariffs, in an emergency measure aimed at easing the domestic repercussions of President Donald Trump’s sweeping trade campaign.

The Cabinet on Tuesday (May 27) approved the outlay for the economic package, which includes 288 billion yen in utility bill subsidies and 100 billion yen to help regional businesses ride out rising costs, according to a government document laying out the plan.

When combined with contributions such as enhanced access to loan programs from the Japan Finance Corporation and insurance support, the overall scale of the programme is expected to reach around 2.2 trillion yen, according to Chief Cabinet Secretary Yoshimasa Hayashi. Utility subsidies and regional support are expected to add another 600 billion yen or so to that total. 

The move comes amid growing concern that Trump’s tariff policies could further strain Japanese businesses and damp consumer sentiment. In April, following the imposition of new tariffs, Prime Minister Shigeru Ishiba pledged that the government would take all necessary steps to mitigate the economic fallout for industries and households.

The extensive support package is also seen as a strategic attempt to bolster public backing for Ishiba and his minority ruling coalition as a summer upper house election approaches. Recent opinion polls show the Cabinet’s approval rating at its lowest since Ishiba took office in October, with many respondents highlighting economic issues as their top concern.

“We will do everything possible to support small and medium-sized enterprises affected by the US tariff measures,” Hayashi said.

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The government is expected to assemble additional relief measures, which may be financed through an extra budget to be compiled later this year.

Japan’s key inflation rate has touched 3 per cent for five straight months through April, driven primarily by rising food and energy costs. The price of rice has almost doubled, and ill-advised remarks on the nation’s staple food has already cost a Cabinet member’s job.

To ease the burden on households, the government plans to reinstate subsidies for gas and electricity between July and September, following their phaseout in April.

Under the renewed programme, utility subsidies are expected to cut monthly electricity bills for the average household by around 3,000 yen over July to September, when demand typically peaks due to high summer temperatures, Hayashi said.

Tokyo is still engaged in trade negotiations with Washington even as Japanese exporters are hit by US tariffs, including a 25 per cent duty on cars and auto parts.

Japan’s top negotiator Ryosei Akazawa also spoke on Tuesday, suggesting that a meeting between Trump and Ishiba was in the cards for the Group of Seven summit meeting in Canada in mid-June, while cautioning against a rushed deal. Local media reports suggest Akazawa will be flying to the US again on Thursday for another round of talks with his counterparts.

“We will proceed with a sense of urgency while maintaining a steady pace, ensuring that negotiations do not result in harming national interests by being driven by a specific deadline,” he said. BLOOMBERG



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