The government approved a ¥31.9 trillion second supplementary budget bill Wednesday to deploy another relief package worth over ¥100 trillion to stave off the economic fallout from COVID-19, which has already dragged Japan into a recession.
The new package is aimed at further shoring up defensive steps for individuals and companies that are financially struggling due to the coronavirus. The total amount — made up of the combined spending of central government, local governments and municipalities, and the private sector, as well as loans offered by financial institutions — will be ¥117.1 trillion.
The size is the same as the first stimulus, which was the largest ever and was financed by the first extra budget for the 2020 fiscal year, which passed the Diet about a month ago.
By implementing these rescue measures worth over ¥200 trillion, Prime Minister Shinzo Abe vowed to shield jobs and businesses during a Monday news conference where he announced the full lifting of the nation’s state of emergency.
One of the policies the prime minister highlighted within the second extra budget was the raising of the daily upper limit of employment adjustment subsidies for companies.
If companies furlough their workers, rather than cutting their jobs, the government now covers up to 100 percent of leave allowances for small and midsize companies. But the upper limit is currently set at ¥8,330 per person, which is often not enough.
This will be nearly doubled to ¥15,000 between April and September, which Abe described as “the most generous level in the world.”
In addition, a maximum ¥330,000 monthly cash handout program is in the pipeline for individuals working at small and midsize firms who have been furloughed but are not financially compensated by their companies.
To help stricken firms and solo proprietors, ¥2 trillion will be prepared to cover one-third or two-thirds of rent for business operators for six months, up to ¥6 million total, if their monthly sales have decreased by half or more compared with the same month in the previous year.
The first supplementary budget was not enough to support companies, as their situation has been aggravated over the past month, so the government has had to beef up financial aid, said Kiichi Murashima, chief economist for Japan at Citigroup Global Markets Japan Inc.
“After all, bankruptcies and job losses are the deepest concerns,” he said.
Murashima added that the new cash handout program for those who cannot receive leave allowances is important, since some companies shy away from the complicated application procedure for the employment adjustment subsidies.
The second relief package has also come up with financial aid for schools that are giving breaks to students who have had difficulty paying tuition. It will support individuals and organizations in the art, cultural and sports fields as well.
Furthermore, a monetary reward of up to ¥200,000 for medical workers taking care of COVID-19 patients on the front line is on the list of measures to strengthen the health care system.
Even as this array of policies has been formulated, criticisms have grown over the speed of implementation for existing measures.
For instance, Japanese media have reported that many local municipalities have struggled to handle a swarm of applications for a ¥100,000 cash handout program for all individuals. The program is financed by the first supplementary budget.
The first extra budget also includes ¥2.3 trillion to offer up to ¥2 million for companies and ¥1 million for solo proprietors experiencing severe financial losses. But this system has also drawn complaints that the application procedure is complex.
As of Monday, about ¥600 billion had been distributed to 450,000 companies, Abe said.
He said many small companies are trying hard to stay afloat in this difficult time, so “we recognize that providing support to them in a speedy manner is critical.”
The second extra budget bill will reportedly be submitted to the Diet on June 8.
Because Japan cannot legally adopt compulsory lockdown measures, the economic fallout may be relatively smaller compared with other nations. Still, the April-June quarter will see a historic downturn, as economists expect a roughly 20 percent contraction in gross domestic product on an annualized basis.
Some think tanks estimate the health crisis could cost over 1 million jobs in the coming months.
Murashima said the economy will likely crawl out of the worst from the next quarter, with consumption partially starting to pick up due to the end of the state of emergency.
“However, it probably won’t be back to the level prior to COVID-19 until next year,” he said.
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