By Leika Kihara and Tetsushi Kajimoto

TOKYO, Reuters – Japan has created an emergency package of $103 billion in order to offset the impact of rising raw materials costs. Prime Minister Fumio Kishhida stated Tuesday that Japan plans to take further measures later this year to encourage long-term reforms.

Kishida faces pressure to increase fiscal spending in advance of the July upper house elections. This will put Japan out of tune with other Western economies who are slowly phasing-out crisis-mode stimuli.

A 13.2-trillion-yen (103 billion Yen) relief package will be paid mainly from reserves. It includes steps to address the immediate impact of rising prices, such as cash payouts to families with low incomes with children and subsidies for gasoline wholesalers.

Direct government spending is expected to amount to 6.25 trillion yen. Rest of the spending is made up of indirect measures like private sector lending.

Kishida announced that the government will prepare an extra budget for parliament and then pass it through to replenish reserves. This is to ensure funds are available to cover any rise in COVID-19 or fuel cost increases.

Kishida said at a news conference that “we must stop rising fuel and material costs disrupting a recovery economic and social action from the pandemic.”

Kishida announced that the government will not only provide relief but also a package of comprehensive measures for accelerating social change in Japan.

Kishida indicated that the package includes steps to make Japan a carbon-neutral country and promotes an administration’s economic policies focusing on wealth distribution. However, he did not provide details.

“We have to be proactive and take a look at the medium to long-term future,” he stated.

Analysts believe that the government will create a second budget to finance additional spending measures later in the year. This could be more than the amount of relief spending announced Tuesday.

Chotaro Morita from SMBC Nikko Securities, said that the government would likely prepare a second budget this autumn or later in the year.

He said that the Komeito, which is the coalition partner of the Liberal Democratic Party (LDP), has asked for an additional budget up to 20 trillion Japanese yen. The second round could include just 20 trillion more yen and add on debt.

This could increase Japan’s debts. Japan has more than double the $5 trillion in industrial GDP.

($1 = 127.8900 yen)