1.636447-2002788780
All pointers are flashing warning signs for Japan's economy, with consumer sentiments at their weakest since 2008. The government plans to raise an additional $154b to ramp up stimulus measures. Image Credit: Bloomberg

Tokyo: Japan is assembling an extra budget worth 16.8 trillion yen ($154 billion) to fund a record stimulus package aimed at shielding the economy from the widening fallout of the coronavirus.

The finance ministry will issue 14.5 trillion yen in debt-covering bonds and 2.3 trillion yen in construction bonds this fiscal year to finance it. Among measures the budget will fund are 4 trillion yen in cash handouts for struggling households and 2.3 trillion yen for small businesses, documents show.

Prime Minister Shinzo Abe is to announced the details of a stimulus package totaling 108 trillion yen. Japan is ramping its response to the outbreak amid mounting calls for more aggressive measures to contain the deadly virus and its economic consequences.

Infection numbers have jumped in recent days, growing to more than 4,000 from less than 400 a month ago and sparking concern Japan is headed for a crisis like the ones roiling the US and parts of Europe.

20%

What Japan's economy will shrink by during this quarter

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.

Bereft of consumer support

Consumer sentiment is already at its lowest since the aftermath of the collapse of Lehman Brothers as the virus starts hitting income and employment.

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 cash handouts to households, freelancers and one-person businesses that have seen their earnings vanish.

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.