(Bloomberg) -- Japanese Prime Minister Fumio Kishida announced extra utility assistance and an extension of gasoline subsidies to help households cope with inflation. 

Subsidies for power bills are to start in August and stay in place for three months, Kishida said at a news conference Friday, adding existing gasoline subsidies would be extended until the end of this year. The premier also said the government is considering cash handouts for pensioners and low-income households. 

“I see clear signs that Japan’s economy is transitioning to a growth-driven model,” Kishida said, citing wage gains as a driver. “On the other hand, as inflation remains high, pensioners as well as small and medium size companies that can’t pass on costs continue to be in a difficult situation.”

The new measures come as current subsidies are set to expire, while a weak yen is expected to add to inflationary pressure through higher import prices. The end of price-relief measures had stoked concerns that higher utility and gasoline costs could weigh on consumption and hurt growth, while they would boost inflation. 

Additional subsidies would cap consumer inflation by 0.5% per month on average, Kishida said. That’s likely to complicate the path of policy normalization by the Bank of Japan. Market participants are expecting the central bank to raise its benchmark interest rates again this year following its historic hike in March. 

The nation’s economy contracted in the first quarter of this year with both households and businesses cutting spending. Kishida said a one-off tax rebate starting this month would help Japan fully exit deflation — an outcome questioned by some experts. 

Kishida spoke as the parliament session is set to end on Sunday after the passage of a controversial political funding reform bill. The prime minister’s chances of leading his long-ruling Liberal Democratic Party into the next election look to be fading, with two polls over the weekend showing voter approval at its lowest since he took office in 2021. 

Three months ahead of a party leadership race, he’s struggling to mollify a public angered by a series of scandals, despite voter-friendly measures including the tax rebate. When asked about a general election and the LDP race, Kishida said he wants to focus on pending tasks in his role as premier. 

(Updates with Kishida’s comments.)

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