TOKYO: Prime Minister Shinzo Abe announced a 108 trillion yen ($989 billion) stimulus package, Japan’s largest ever, to rescue the coronavirus-hit economy with Tokyo and six other economic hubs set to be put in a state of emergency.
Japan’s Abe Moves to Declare Emergencies in Tokyo, Osaka Areas
The package, equivalent to about 20% of the nation’s economic output, will include cash handouts worth 6 trillion yen for households and small businesses hit by the virus and offers businesses deferrals on tax and social service costs worth 26 trillion yen, Abe said Monday.
The premier said he plans to officially declare as soon as Tuesday a state of emergency for Tokyo, its three neighboring prefectures, Osaka, Hyogo and Fukuoka prefectures. He said details of the stimulus package and an extra budget to finance it would be announced Tuesday.
The first phase of the package aims to stop job losses and bankruptcies, while a second round of aid, after the virus is contained, will try to support a V-shaped economic recovery, according to a government document obtained by Bloomberg.
“The details of the measures and the numbers involved are being debated until the last minute,” ruling party policy chief Fumio Kishida said earlier Monday before Abe spoke.
Economists see a deep Japanese recession ahead, with export markets paralyzed, the summer Olympics postponed and the country’s capital facing the prospect of stronger stay-at-home requests.
According to the document, Japan is planning to distribute 300,000 yen to lower income households that have lost pay because of the virus. Households with children will also get aid. Japan Plans Handouts Over $2,750 in Record Stimulus Package
For businesses, 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. Some smaller businesses will see their property taxes cut back as far as zero.
For now, Japanese employment figures have been holding up. The country’s jobless rate held at 2.4% in February, but there’s been a sharp drop in the ratio of available positions to the lowest level in three years. More recent developments showed a rapid up-take of emergency loans via a government program for people who have lost their jobs or face wage cuts.
The document showed the government planning a second phase of measures once the virus itself is brought to heel. While these measures are less well-sketched out, they include steps to increase consumer spending and tourism, and subsidies for regional economies.
The stimulus package also includes a plan to secure enough Avigan anti-flu drugs for 2 million people this fiscal year, the document showed. Naoya Oshikubo, senior economist at SuMi TRUST, however said it would not ensure Japan avoids a recession in the first half of 2020 "but will kickstart a V-shaped recovery" in the second half.
The Japanese economy was tottering even before the coronavirus struck, with growing fears of a recession. Dai-ichi Research Institute said additional restrictions in Tokyo were estimated to slash Japan´s GDP by 5.1 trillion yen ($47 billion) for a month.
The postponement of the Tokyo Olympics until July 2021 is also likely to take a chunk out of the country´s GDP although the losses should be recouped when the Games go ahead. Like other major central banks, the Bank of Japan has unveiled emergency measures to stem the economic damage.