By Takaya Yamaguchi
TOKYO (Reuters) -Japan’s government will pledge in this year’s policy guidelines to take “nimble policy action” as U.S. tariffs and high inflation impact household finances, according to a draft seen by Reuters.
The statement, to be included in Japan’s annual economic and fiscal policy guidelines in June, suggests the government could consider compiling a supplementary budget later this year, depending on economic and price developments.
The government also plans to reiterate its expectations for the Bank of Japan to achieve the 2% price target in a sustainable and stable manner.
The draft guidelines, which form the basis for budget planning, will note that, although the Japanese economy has been recovering modestly, downside risks posed by the U.S. tariffs and rising consumer prices “need to be closely monitored.”
The pursuit of fiscal discipline should not narrow policy options, the draft said, giving room for swift policy responses such as stimulus measures when necessary.
The government will mobilise all measures to achieve wage growth to ensure the transition to a growth-oriented economy driven by wage hikes and investment, the draft said.
The draft stated the BOJ is expected to achieve the 2% inflation target in a sustainable and stable manner through appropriate monetary policy in response to economic, price, and financial conditions.
A key Japanese government economic panel, the Council on Economic and Fiscal Policy (CEFP), will meet on June 5 to discuss the draft guidelines and finalise them on June 13.
(Reporting by Takaya Yamaguchi; Writing by Makiko Yamazaki; Editing by Sam Holmes)
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