Japan enacts record extra budget to address pandemic fallout

The Diet enacted a record ¥31.91 trillion ($298 billion) extra budget Friday, allowing it to scale up measures designed to offset the social and economic fallout from the coronavirus pandemic to twice the previous level.

As Japan faces the prospect of a new normal living with the virus, the second supplementary budget for fiscal 2020, designed to fund an additional package worth about ¥117 trillion, was approved by the House of Councilors.

The Upper House’s budget panel endorsed the package, focusing on financial aid for front-line medical staff and subsidies for small businesses, in the morning following its passage through the more powerful House of Representatives on Wednesday with the support of almost all opposition parties.

With public frustration growing over what many have described as a slow response by Prime Minister Shinzo Abe’s administration to the fallout from the pandemic, the additional package was crafted only six weeks after the approval of the ¥25.69 trillion first extra budget for the fiscal year from April.

A large majority of opposition lawmakers have stressed the need to implement more measures to soften the economic pain of the pandemic. But they are not all satisfied with the way in which new cash has been allocated.

They have been intensifying pressure on the government over allegedly shady dealings involving advertising giant Dentsu Inc. in connection with a subsidy program for virus-hit firms, funded under the first extra budget.

Abe’s administration has refused to extend the ongoing parliamentary session beyond next Wednesday, though opposition parties repeatedly called for more time to grill it over the latest budget and key political issues.

As part of the budget, the government will give ¥200,000 to each worker at hospitals treating COVID-19 patients and ¥100,000 to each member of staff at medical institutions that have secured beds and are prepared to accept people with the respiratory disease.

Some small firms and individual proprietors that are running low on cash will be provided with aid to an upper limit of ¥6 million to help them make rent payments.

Government debt, including ¥22.61 trillion in deficit-covering bonds, will finance the budget entirely.

The spending will push Japan’s debt dependency ratio — the amount of government bonds issued and other borrowings made annually as a percentage of total government expenditure — to above 50 percent for the first time since fiscal 2009 following the global financial crisis.

The country’s fiscal health is the worst among major economies, with public debt topping ¥1,100 trillion.

Opposition lawmakers said a ¥10 trillion reserve fund in the second extra budget was too large to be used without a breakdown of the outlay and further Diet approval.

Following the criticism, Abe’s administration has decided to earmark ¥5 trillion out of the fund for the purpose of helping firms maintain employment and strengthening the medical systems.