Business / Economy

Japan’s virus stimulus package to come in two phases

Bloomberg, Kyodo

Prime Minister Shinzo Abe’s government will deploy a two-phase economic package to help workers and businesses survive the impact of the coronovirus pandemic, according to a government draft of the package.

The first phase aims to stop job losses and bankruptcies. Once the virus is contained, a second round of aid will try to support a “V-shaped” economic recovery, according to a draft of the plan.

The Cabinet is expected to approve the emergency economic package Tuesday, which is said to be as big as ¥60 trillion.

“The details of the measures and the numbers involved are being debated until the last minute,” ruling party policy chief Fumio Kishida said Monday. “The final total package size and its key points will be relayed by the prime minister.”

The plan comes as Abe faces increasing pressure to declare a state of emergency amid a jump in infections in Tokyo. Economists see a deep recession ahead, with export markets paralyzed, the Summer Games postponed and the country’s capital facing the prospect of stronger stay-at-home requests.

Abe’s ruling party last week proposed the country’s biggest-ever stimulus package to fight the virus. The ¥60 trillion plan includes fiscal measures worth ¥20 trillion, with more than ¥10 trillion to be used for handouts to households. That followed the announcement of cash handouts in the U.S. by President Donald Trump.

The draft 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.

Under the first phase of the economic package, households with children will also get aid, which will come from ¥1 trillion in a reserve fund.

With the fund, the government will provide an additional ¥10,000 per child for families that receive child allowances, according to the draft.

The additional child-rearing assistance will be distributed to households that receive ¥10,000 to ¥15,000 a month for children up to ninth grade — usually 15 years old — according to the draft. The additional ¥10,000 per child will be provided one time only.

As a key pillar of the emergency package, the government will provide ¥300,000 to households whose income has fallen by more than half from the previous year, the draft says.

Households where income is reduced to a level that would exempt them from paying residence tax will also be eligible for the cash handout program.

Applicants will be required to file for support at their respective municipal government offices.

At a meeting of Liberal Democratic Party executives Sunday, the government also reported a plan to extend ¥2 million for small and medium-sized businesses where income has fallen by more than half, as well as ¥1 million for self-employed persons such as freelance workers.

Interest-free loans of up to ¥30 million will be provided through private financial institutions for small and midsize companies whose sales have fallen by 20 percent or more in the past month. The loans will be available for three years.

In an effort to help companies — regardless of their size — bring production facilities back to Japan, the government will subsidize half of their relocation costs.

For major companies, the government will expand the size of crisis response loans through the Development Bank of Japan and other lenders to ¥5 trillion from the current ¥200 billion.

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