Prime Minister Shinzo Abe said Wednesday the government’s latest emergency package to cushion the fallout from the coronavirus outbreak will boost the economy by up to an annualized 3.8 percent in real terms.
Abe made the remark about the country’s ¥108.2 trillion ($1.01 trillion) stimulus package, it’s largest ever, at a meeting of the government’s Council on Economic and Fiscal Policy, at a time when many economists predict a double-digit economic drop in the April-June period.
“Giving top priority to protecting people’s lives, health and livelihood, we drew up the economic package,” Abe told the meeting.
The Cabinet Office, which is in charge of the forecast, did not show the bottom of the estimated range of the projection, as such a scenario is “most unlikely to happen,” an official said.
As a key pillar of the economic package approved by the Cabinet last week, the government allocated about ¥4 trillion to provide ¥300,000 to each household whose income has dropped sharply due to the spread of the coronavirus.
Under the stimulus, with ¥39.5 trillion in direct fiscal spending, the government will provide up to ¥2 million each to small business owners, including freelance workers, if their revenue drops significantly.
But Abe’s administration has come under fire for limiting the scope of eligibility for the cash handouts and for remaining reluctant to compensate virus-hit businesses, prompting his ruling coalition to start considering a uniform payment.
Opposition parties have criticized Abe’s government for counting the amount allocated to deferred social security and tax payments as part of the overall stimulus amount, and say a much smaller portion of the funding will be coming directly from state coffers relative to the total size of the package.
According to the International Monetary Fund’s World Economic Outlook report released Tuesday, the Japanese economy is projected to contract by 5.2 percent in 2020 from the year before, the worst downturn since 2009 at the height of the global financial crisis.
The world’s third-largest economy shrank an annualized 7.1 percent in the October-December period last year, hit by a consumption tax hike and a devastating typhoon.
Gross domestic product is expected to shrink an annualized 4.06 percent and 11.08 percent in the January-March and April-June quarters, respectively, according to estimates at 24 private institutions compiled by the Japan Center for Economic Research.