TOKYO • Prime Minister Shinzo Abe yesterday doubled Japan’s stimulus measures as he looked to deliver on his bold promise to keep businesses and households afloat with the world’s biggest coronavirus response package.
His Cabinet approved a 117 trillion yen (S$1.54 trillion) set of measures that includes financing help for struggling companies, subsidies to help firms pay rent, several trillion yen for healthcare assistance and support for local economies.
The spending will be funded by a second supplementary budget that breaks a record for an extra budget set only last month.
“With this world’s biggest package equivalent to 40 per cent of our gross domestic product (GDP), we’ll protect the Japanese economy through this once-in-a-century crisis,” Mr Abe said.
“It is of utmost importance that we deliver assistance to people in tough situations,” he added, urging MPs to pass the measures quickly through Parliament.
Part of the stimulus package involves giving away 100,000 yen to every adult and child in the country.
The latest aid was finalised after data last week confirmed Japan has sunk into a deep recession and polls showed support for Prime Minister Abe’s Cabinet dropping to a fresh low over its handling of the outbreak.
“We are determined to protect the Japanese economy,” said Finance Minister Taro Aso, after the Cabinet approved the latest extra budget. “We are facing a crisis that goes beyond the scale of the Lehman shock.”
The ramped-up support went well beyond what was expected just a week ago, giving a stronger impression that the administration was pulling out all the stops to save jobs and businesses despite the spotty disbursement of earlier measures such as cash handouts and subsidies.
While the government ended its nationwide state of emergency this week and new coronavirus cases have tailed off, the economic outlook is still grim.
Analysts see GDP shrinking by more than 20 per cent this quarter and say the recovery could be slow as exports, tourism and business investment struggle to rebound.
The new measures match the overall size of last month’s 117 trillion yen package, bringing the total of the two packages to just under 234 trillion yen. The record second extra budget of 31.9 trillion yen to help fund the measures comes less than a month after the passage of the first.
The economic package also boosts loans and investment via government-backed lenders by 39 trillion yen to a record 62.8 trillion yen in the current fiscal year, measures that do not show up in the extra budget figures.
The government’s extra spending comes amid reassurances from the Bank of Japan that it will not allow bond yields to rise. In a rare joint statement last week, the government and the central bank pledged tight cooperation to get funds to struggling businesses and shield the economy from fallout from the pandemic.
Japan will boost its debt issuance by 59.5 trillion yen to fund the second extra budget and the other loans and investment in the new stimulus package, the Finance Ministry said. That will bring the total bond issuance this fiscal year to about 212 trillion yen, another bump from the 128.8 trillion yen planned in December.
The new spending will push Japan’s debt dependency ratio up to a record 56.3 per cent, added the Finance Ministry. Japan already has the developed world’s biggest public debt load at more than twice the size of the economy.
Still, Mr Aso said now was clearly not the time to be fretting about fiscal reform.
A growing economy is needed first, he added.
BLOOMBERG, AGENCE FRANCE-PRESSE