Inflation Forces Japanese Government to Cut Electricity Bills by 20%

Key Takeaways:

  • The Japanese government will assist households by cutting electric bills by 20%.
  • Japanese Prime Minister Fumio Kishida’s approval ratings are low.
  • BOJ officials intervened in the forex market to support Yen’s dramatic fall.
Japanese receive electricity discount from government amid high inflation
Electricity Worker In Japan

Wisconsin(Coinchapter): The Japanese government plans to cut household electricity bills by 20% next year in response to inflation, which hit a 40-year high recently.

Electricity bill cuts are part of a comprehensive economic package totaling ¥29.1 trillion ($195 billion). According to news reports, the total package will likely exceed ¥71.6 trillion. Higher energy prices are causing financial strain. The package aims to save Japanese citizens approximately ¥2,800 per month ($18.80).

The government will assist with electricity bills and around ¥900 a month on city gas service charges. The government primarily issues bonds to cover these charges, although some of them come from taxes.

Prime Minister’s Approval Ratings Low amid High Inflation

Japanese Prime Minister Fumio Kishida has dismal approval ratings under 30%.

Mr. Kishida has been trying to earn citizens’ trust by extending support to households and businesses. Specifically, he has ordered government officials to ease inflation and focus on the Yen’s weakness to revive the economy.

Tokyo, Japan, April 2022, Japan Prime Minister Fumio Kishida in a meeting
Tokyo, Japan, April 2022, Japan Prime Minister Fumio Kishida in a meeting

The Japanese government avoids raising interest rates but has decided to stick to a bond issuance plan instead. The Bank of Japan (BOJ) said that making money more expensive by raising interest rates will suppress weak demand and increase risks to an already fragile economy.

Although the government does not want a weaker Yen, they want to use the present time to their advantage. Therefore, officials decided to remove a daily tourist cap of 20,000 to 50,000.

More tourists will certainly help restore the world’s third-largest economy. Before the pandemic, Japan averaged over 2 million tourists a month. This past August, that figure dropped to an estimated 169,800, according to the Japan National Tourism Organization.

Trading the Yen

The BOJ intervened a week and a half ago in forex markets because Yen’s weakness was getting out of control.

During the past two months, there was a rapid rise in the US Dollar over the Japanese Yen. In August, the USD/JPY touched a low of 130.394, and by the third week of October, the pair reached 151.941 until the BOJ began pumping in billions of dollars.

JPY/USD daily price chart. Source: TradingView
JPY/USD daily price chart. Source: TradingView

Since then, trading has leveled off as officials ensure investors know the Yen is closely guarded against sudden weakness.

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