Tokyo: Japan has announced a record 108.2 trillion yen ($994 billion) stimulus package to shield the economy from the coronvirus’ widening fallout as Prime Minister Shinzo Abe declares a state of emergency.
The package’s size - equivalent to 20 per cent of the nation’s annual economic output - highlights the magnitude of the damage that policymakers are bracing for. Abe earlier Tuesday evening declared a state of emergency for Tokyo, Osaka and five other prefectures, empowering local authorities to urge people to stay at home in major cities that generate about half of Japan’s economic output.
Japan is ramping up its response to the outbreak amid mounting calls for more aggressive measures to contain the deadly virus and its economic consequences.
Some analysts see the economy shrinking nearly 20 per cent this quarter with export markets paralyzed, the summer Olympics postponed and the country’s major cities now facing the prospect of extended stay-at-home directives. For now, the government doesn’t have the luxury of worrying about adding to the developed world’s biggest public debt load.
Like past stimulus packages in Japan, this one’s spending punch will be much smaller than the headline figure suggests. Once contributions from private business and government loan programmes are stripped out, actual fiscal spending totals 27 trillion yen, documents from the finance ministry show.
To fund the package Japan is compiling an extra budget of 16.8 trillion yen for this fiscal year, with 14.5 trillion yen to be raised from debt-covering bonds and 2.3 trillion yen from construction bonds.
Stem the rot
Much of Abe’s stimulus is aimed at stopping job and business losses. The measures offer larger subsidies for firms that keep workers on the payroll. Companies hit by the virus will be able to defer income and regional tax payments for a year.
The plan also calls for 4 trillion yen in cash handouts to struggling households and another 2.3 trillion yen for small businesses.
Once the virus is brought under a control, a second planned phase of stimulus will aim to support a quick recovery with steps to increase consumer spending and tourism, and subsidies for regional economies.