The Japanese government on Saturday approved an emergency economic stimulus package worth about 3.5 trillion yen (about 29.06 billion U.S. dollars) to drive regional economies hit by higher prices due to sales tax hike and the yen's fast retreat.

The stimulus package is aimed at providing subsidies designed to offset rising fuel costs and help local governments carry out necessary measures to invigorate their communities at their discretion, according to local report.

Under the package, 9.96 billion dollars will be used to support consumers and companies, about 4.98 billion dollars for revitalization of local communities and some 14.11 billion dollars for disaster prevention and reconstruction, said Japan's Kyodo News.

An extra budget for the fiscal 2014, intended to fund the package, is slated for cabinet approval on Jan. 9 and the government will try to finance the supplementary budget from the fiscal 2013 budget and tax revenue in the current fiscal year.

Along with a delay of the second consumption tax increase to 10 percent by 18 months from October 2015, analysts say the package is likely to prop up domestic demand, according to the report.

It is estimated that the new package will increase Japan's real gross domestic product by about 0.7 percentage points, Kyodo cited the government as reporting.

The Japanese economy, the third largest in the world, slipped into a recession in the wake of the April's 3-percentage-point consumption tax hike to 8 percent that hurt domestic consumption.

At the same time, under the ultra-loose monetary easing, the yen retreated sharply and a weaker yen drives up the import costs and energy prices at home, hurting households and small- and medium-sized enterprises.

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