Photo/Illutration A gas station’s display indicates soaring prices of gasoline in Tokyo on April 20. (Asahi Shimbun file photo)

The government has come up with an emergency package of measures to ease the economic impact of rising prices accelerated by Russia’s invasion of Ukraine. The awakening of inflation requires serious policy responses, but the massive spending plan is a distressing example of misguided use of taxpayer money.

The centerpiece of the 6.2-trillion-yen ($47.8 billion) package is an expansion of the temporary state subsidies program to curb surging gasoline prices. Its expiration date was moved to the end of September from the end of April, and the amounts of subsidies available to oil wholesalers were increased to 35 yen per liter from 25 yen while target prices at the pump were lowered from 172 yen per liter to 168 yen.

Asahi Shimbun editorials have taken issue with the government’s continuous intervention in the gasoline market. This policy hampers the workings of the market, which allow higher prices to curb demand naturally, and runs counter to efforts to drastically slash the nation’s carbon footprint.

This approach could also distort income distribution by rewarding well-heeled consumers who drive gas-guzzling cars.

Gas subsidies should be nothing but an emergency relief measure with a clear time limit to alleviate the pain of high prices until policy efforts are in place that focus on supporting truly needy consumers and hard-hit businesses. The government’s decision to extend the period of the program and raise the subsidies amounts to an irresponsible giveaway and deserves to be criticized.

The government’s draft package said the subsidies would be available only during the first half of the current fiscal year. Alarmingly, however, the time limit was effectively dropped due to opposition from the ruling coalition. It would be simply outrageous if the ruling camp was promoting the measure, which costs taxpayers hundreds of billions of yen each month, as a way to garner votes in Upper House election this summer.

The government’s package is also rather short on measures for the needy. It includes 50,000 yen in cash benefits for each of the children in low-income households, but other needy people are ineligible for the assistance.

Soaring fuel prices inevitably push electricity and gas charges higher. The government should focus on swiftly crafting income-differentiated measures to reduce the financial burden of higher prices of goods and services, including daily necessities, in addition to gasoline.

As part of its policy responses to the COVID-19 pandemic, the government introduced a system for account registration to receive benefits using the so-called My Number (individual number) card issued under the social security and tax number setup. Use of the system for the payment of the planned benefits is worth serious consideration.

The financing of the emergency package also raises serious fiscal policy questions. The government plans to dip into a special reserve fund, which can be used without advance approval by the Diet, to pay for much of the additional 2.7 trillion yen in spending. Such blatant abuse of the contingency fund while the Diet is in session is nothing but a gross violation of the constitutional principle of fiscal democracy.

There is absolutely no justification for expanding the use of the funds earmarked for policy responses to the pandemic simply to deal with higher oil prices. We urge the government and ruling coalition to drop this plan.

Costlier crude inevitably delivers a heavy economic blow to resource-poor Japan. Policymakers need to face up to the harsh reality and map out a strategy for sharing the burden among consumers, businesses and the government, and then ask the public to cooperate.

There is no magical wand to tackle the challenge without causing some pain.

The current situation is sorely testing the viability of Prime Minister Fumio Kishida’s signature proposal to realize a “new form of capitalism” for appropriate distribution of added value, which should allow higher wages and costs to be passed on to consumers in a fair manner.

--The Asahi Shimbun, April 28

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