Japan’s ruling coalition officials called on Tuesday for a fresh spending package to cushion the economic blow from the Ukraine crisis, which has hit households and retailers by driving up already rising energy and food prices.
Japan must come up with measures to deal with a possible economic downturn as the war in Ukraine could aggravate the hit from rising inflation and supply shortages, said Tatsuo Fukuda, general council chairperson of the ruling Liberal Democratic Party (LDP).
“Given rising inflation, there’s a chance Japan may experience stagflation,” Fukuda told a media briefing.
In a speech delivered at a meeting of government and ruling coalition officials, Natsuo Yamaguchi, head of the LDP’s coalition partner Komeito, also called on the administration to consider compiling a new stimulus package.
Soaring crude oil and food prices are having a broad impact on households, small firms and farmers, Yamaguchi said, calling for subsidies and a freeze of add-on tax charged for gasoline.
“Depending on how things unfold, we could see the worst crisis in post-war history,” he said after the meeting.
Japan has lagged other advanced nations in achieving a solid economic recovery from the COVID-19 pandemic, as curbs to combat a rise in new Omicron variant cases weighed on consumption.
The resource-poor country is particularly vulnerable to rising import costs for fuel and food, which have hit households suffering from slow wage growth.
Prime Minister Fumio Kishida’s administration has pushed back against calls for a fresh spending package for now, as it focuses on passing through parliament the state budget for the fiscal year beginning in April.
But Kishida is under pressure to heed calls for bigger spending ahead of an upper house election scheduled around July,which he must win to solidify his grip on power and push through his agenda of redistributing wealth to households.
