Japan will cut household electricity bills by about 20 percent early next year as an inflation-relief step under a broader economic package that will entail nearly 30 trillion yen ($204 billion) in government spending, sources familiar with the matter said Wednesday.

The size of the package, which is scheduled to be unveiled Friday, will likely exceed 67 trillion yen, including spending by municipal governments and companies, the sources said.

The amount of government outlay was raised from 25.1 trillion yen planned earlier amid calls from ruling lawmakers, they said.

Higher energy prices are threatening to squeeze household budgets and the government is seeking to reduce utility bills, covering not just electricity but also gas.

The existing subsidies for oil wholesales to lower retail gasoline and kerosene prices will be extended beyond December, the sources added, though they will be offered at a reduced amount from June.

If these steps are implemented, an average household would see their expenditure on utilities and gasoline cut by 45,000 yen for the nine months to September.

The government plans to tap tax revenue to fund the package, though most funds would have to be secured by issuing government bonds, the sources added.

To put a limit on spending, it plans to phase out support for utility bills in September next year, as fiscal restoration is a daunting challenge for Japan whose fiscal health is already the worst among major economies.

Based on the new package, the government plans to submit a draft extra budget for the current fiscal year to next March to parliament.

Prime Minister Fumio Kishida is scrambling to reverse a recent slump in support ratings by extending additional support to households and companies. Core consumer inflation in Japan is at its highest level in some three decades amid higher fuel costs caused by Russia's war in Ukraine and the yen's rapid deprecation, which has inflated import prices.

One major pillar of the package is lowering household electricity bills by 7 yen per kilowatt-hour, meaning that an average household would save around 2,800 yen a month. Companies will receive support of 3.5 yen per kilowatt-hour.

In addition, an average household is expected to save about 900 yen in monthly city gas service charges, with the government providing support of 30 yen per cubic meter of consumption.

Kishida has instructed officials to focus on steps to ease the pain of accelerating inflation and address yen weakness, spur wage growth and rejuvenate the economy.

The package will also include handing out 100,000 yen per mother expecting a child as the population is rapidly aging, and promoting the domestic production of grain, fertilizers and livestock feed by extending support, the sources said.

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