Japan Electricity Plan Cuts:

 Article Source: https://mainichi.jp/english/articles/20221026/p2g/00m/0na/037000c

Article:

TOKYO (Kyodo) -- Japan will cut household electricity bills by about 20 percent early next year as an inflation-relief step under a broader economic package that will entail nearly 30 trillion yen ($204 billion) in government spending, sources familiar with the matter said Wednesday.

The size of the package, which is scheduled to be unveiled Friday, will likely exceed 67 trillion yen, including spending by municipal governments and companies, the sources said.

The amount of government outlay was raised from 25.1 trillion yen planned earlier amid calls from ruling lawmakers, they said.

Ideas:

Electric companies might not be too happy with the situation unless of course they can get compensated for the revenue loss.

It's the same with the subsidy related to energy/oil companies. While consumers and other along the supply chain might be happy for the subsidy or the electricity bill cuts, but somewhere along the supply chain someone has to pay. 

And is 20 percent even enough with the continued inflation increase over the past year in Japan.

While it's good that the Japanese government is finally doing something after months of not much action related to inflation increases.

Article:

Higher energy prices are threatening to squeeze household budgets and the government is seeking to reduce utility bills, covering not just electricity but also gas.

The existing subsidies for oil wholesales to lower retail gasoline and kerosene prices will be extended beyond December, the sources added, though they will be offered at a reduced amount from June.

If these steps are implemented, an average household would see their expenditure on utilities and gasoline cut by 45,000 yen for the nine months to September.

Ideas:

Even at a 45,00 yen decrease in bills there are probably households that are still not so well off as inflation has continued to increase over the months in 2022. 

After the essential bills are paid there probably isn't much left for anything else and as a result consumer spending in the Japanese economy is not going to look too good for 2022.

Consumer spending has always been a challenge for the Bank of Japan in contrast to other countries where consumer spending is around 60 percent of GDP while in Japan its around 50 percent at best.

Article:

The government plans to tap tax revenue to fund the package, though most funds would have to be secured by issuing government bonds, the sources added.

To put a limit on spending, it plans to phase out support for utility bills in September next year, as fiscal restoration is a daunting challenge for Japan whose fiscal health is already the worst among major economies.

Based on the new package, the government plans to submit a draft extra budget for the current fiscal year to next March to parliament.

Ideas:

Government bonds might be the best strategy as any tax increase related to households is probably not going to be met with enthusiasm as the 2014 and 2019 tax increases showed.

It must be remembered that Japan is not Greece and are two different situations. The debt Greece had/has was mostly external while the debt Japan has is mostly internal debt related most to government bonds.

To be fair and honest government always try to limit spending but it never works and they continue to spend as needed. 

Most likely the Japanese government will increase the sales tax like they did in 2014 and 2019 to reduce the deficit.

Article:

Prime Minister Fumio Kishida is scrambling to reverse a recent slump in support ratings by extending additional support to households and companies. Core consumer inflation in Japan is at its highest level in some three decades amid higher fuel costs caused by Russia's war in Ukraine and the yen's rapid deprecation, which has inflated import prices.

One major pillar of the package is lowering household electricity bills by 7 yen per kilowatt-hour, meaning that an average household would save around 2,800 yen a month. Companies will receive support of 3.5 yen per kilowatt-hour.

In addition, an average household is expected to save about 900 yen in monthly city gas service charges, with the government providing support of 30 yen per cubic meter of consumption.

Ideas:

It seems most Prime Ministers recently don't have much support as even Suga didn't have much support. 

It seems like a savings of 2,800 yen is very much or around US 28 dollars. While the government can't do everything as it can't interfere in the market economy too much, but like during the pandemic in this case more could help families in need.

Even at 3.5 kilowatt-hour might not be enough to help companies and their energy needs. 

But again a government can only do so much before it interferes in the economy too much.

Article:

Kishida has instructed officials to focus on steps to ease the pain of accelerating inflation and address yen weakness, spur wage growth and rejuvenate the economy.

The package will also include handing out 100,000 yen per mother expecting a child as the population is rapidly aging, and promoting the domestic production of grain, fertilizers and livestock feed by extending support, the sources said.

Ideas:

The yen's weakness seems to be the major challenge at the present time, and the Bank of Japan is been intervening in the markets to bring it under control but will modest success.

The biggest challenge is wage growth as major companies don't seem to be interested and or just don't have any room as their profit margins are just too razor thin because of the continued increase in energy and material costs.

I doubt that a 100,00 yen per mother is going to help in rapidly aging situation as there are just too many structural problems related to raising families in Japan. 

Japan needs to find ways to reduce its dependence on external food sources but how long will it take for Japan to reduce significantly the need for external food sources, if it can even be done at all.

Have a nice day and be safe!