Japan to spend $2 bln to ease oil price effect

TOKYO, Dec 25 (Reuters) - Japan will spend 215 billion yen ($1.9 billion) on a package of measures to ease the pain felt by the public from high oil prices, which includes cutting expressway tolls and boosting financing help for small firms.

The amount is seen increasing further as it does not include costs to subside home heating oil in cold areas, suggesting that government efforts to rein in a burgeoning fiscal deficit are stalling.

The government will set aside 43 billion yen under the supplementary budget for fiscal 2007/08 and another 172 billion yen under the state budget for next fiscal year for the package, formalised at a meeting of cabinet ministers on Tuesday.

"There is nothing good about rising crude oil prices for Japan's economy," with the damage being felt broadly among companies and households, Economics Minister Hiroko Ota told a news conference.

"We took steps focusing on areas that are most hard hit," she said.

Items on the spending list are increases in financing support for small firms hit by rising costs, cuts in late night expressway tolls to help truck drivers and subsidies to sustain bus and plane transportation at remote areas.

The move reflects growing pressure among ruling Liberal Democratic Party lawmakers to boost government spending to win back support in rural areas after the party's defeat in an upper house election in July.

The central government will also foot half the bill for local governments that provide heating oil allowances to citizens on low incomes.

Four prefectures in northern Japan already plan or have expressed interest in providing subsidies, one being Hokkaido where temperatures fall as low as -20 Celsius (-4 F) in December.