According to Bloomberg, Japan is taking a novel approach to combat the country’s current inflation problem. The prime minister, Fumio Kishida, has mandated a $490 billion economic stimulus package.
Official sources predict that the stimulus plan will improve the gross domestic product by 4.6% and reduce inflation by at least 1.2%.
The Prime Minister noted that the overall size of the package is 71.6 trillion yen ($490 billion).
This represents the government’s most recent spending binge in recent years as it struggles to control inflation and the yen’s value. According to recent data, this month’s price increase was the most since 1980.
The drop in the value of the yen, however, is mostly to blame for the price pressures. It is getting harder for households to live within their means as the value of the yen keeps falling.
However, the decline in the value of the nation’s national currency is being attributed to the central bank’s failure to boost interest rates, which are currently close to zero.
Japan is continuing to use quantitative easing as a solution to the problem, in contrast to other significant economies that have raised interest rates in reaction to inflation.
It remains to be seen if this would be successful. For the homes, though, it would be a pleasant development. The majority of the stimulus money goes toward family energy bills and lowers food prices. This implies that increased expenditure may not result in higher inflation.
