Prime Minister Shinzo Abe on Friday instructed ministers to draw up a financial package to assist reconstruction in areas hit by recent natural disasters and to cope with other risks to the economy both domestic and abroad, such as the U.S.-China trade row and the U.K.’s exit from the European Union.
The government plans to earmark necessary funds for the package, expected to be worth a few trillion yen, in a supplementary budget for fiscal 2019 through March and in the fiscal 2020 budget, government officials said.
In the first such financial package in three years, spending on reconstruction work will likely receive priority after a series of natural disasters in recent weeks damaged roads, bridges, river embankments, houses and farming facilities in a wide area of the country.
“Recovery and reconstruction from the disasters is the first pillar of the economic package,” Chief Cabinet Secretary Yoshihide Suga quoted Abe as telling ministers earlier in the day.
Two other pillars are budgets to support the economy to cope with a possible slowdown of overseas economies, and those to maintain economic vitality beyond the 2020 Tokyo Olympic Games, Yasutoshi Nishimura, minister in charge of economic revitalization, explained during a news conference the same day.
“We’d like to achieve autonomous economic growth centered on private-sector demands beyond the 2020 Tokyo Olympic and Paralympic games,” Abe told an Upper House budget committee session on Friday day. “We’d like to make (a package) that will make people feel more confident about the economy,” he told the lawmakers.
The government aims to support the economy in the yet-to-be compiled package, especially after it raised the consumption tax from 8 percent to 10 percent on Oct. 1, just before Typhoon Hagibis hit the nation.
Also included will be steps for domestic farmers who will be affected by the reduction or elimination of Japanese tariffs on U.S. imports under a bilateral trade deal that could come into force as early as January.
The ongoing U.S.-China tariff war and the United Kingdom’s planned exit from the European Union are also casting uncertainty over the Japanese economy.
The Cabinet also decided Friday to spend about ¥130 billion ($1.2 billion) in a separate emergency package to respond to immediate needs in areas ravaged by Typhoon Faxai in September and Typhoon Hagibis in October.
The funds — part of the ¥500 billion in reserves from the state budget for fiscal 2019 through March — will go to rebuilding damaged infrastructure and homes, and assisting small and medium-size companies as well as farmers, the government said.
The government plans to give a maximum of ¥3 million each to households whose homes were destroyed, while small and medium-size companies in the four hardest-hit prefectures of Miyagi, Fukushima, Tochigi and Nagano will receive subsidies to rebuild their businesses.
As tourism is another sector reeling in the aftermath of the natural disasters, the government plans to offer a discount of ¥5,000 per night per person for those visiting the disaster-hit areas.
The program is expected to run from December until March, a government official said, adding that details still have to be worked out.
The full impact of the disasters is still being assessed but the domestic agriculture, fisheries and forestry sectors alone suffered over ¥218.5 billion worth of damage across 38 of the country’s 47 prefectures. Over 88,000 homes have been confirmed to be partially damaged or completely destroyed, according to the government.
In the coming weeks until the budgets are drafted, Japan needs to weigh the need to support reconstruction and the world’s third-largest economy against the task of fixing its tattered finances.