Japan's Cabinet approved Tuesday a 2.7 trillion yen ($21 billion) draft extra budget for fiscal 2022 to ease the pain of surging energy, food and other prices stemming from Russia's invasion of Ukraine.
The government will issue new bonds to entirely finance the budget, adding to concerns about the nation's fiscal health, already the worst among major developed countries.
The supplementary budget for the year that started in April will be used to finance part of a 6.2 trillion yen relief package compiled in late April.
The ruling coalition led by Prime Minister Fumio Kishida's Liberal Democratic Party is aiming to have the budget clear parliament before the current session ends on June 15.
About 1.5 trillion yen of the extra budget will be spent to replenish reserve funds the government is using to implement some of the measures in the relief package, such as subsidies for oil wholesalers to bring down retail gasoline prices and cash handouts of 50,000 yen per child for low-income households.
The government said it needed to draw on the reserve funds, which can be spent without parliament approval, to respond to sharp price rises swiftly.
A record 107.60 trillion yen budget for fiscal 2022 includes 5.5 trillion yen in reserve funds to cope with the COVID-19 pandemic and other emergency purposes.
The remaining 1.2 trillion yen of the extra budget is earmarked to extend the current subsidy program for oil wholesalers until the end of September.
Fuel prices have been rising as the global economy recovers from the coronavirus pandemic fallout, but the pace accelerated on supply concerns following Russia's invasion of Ukraine in late February.
Prices of grain such as wheat, of which Russia and Ukraine are major producers, have also risen sharply.
The emergency budget and debt issuance come as Japan has long been struggling to achieve its fiscal discipline goals.
"We will work to execute the budget swiftly and appropriately without undermining our efforts toward fiscal consolidation," Finance Minister Shunichi Suzuki said in a press conference.
Japan's public debt has amounted to twice the size of gross domestic product, according to the Organization for Economic Cooperation and Development.
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