Prime Minister Yoshihide Suga on Tuesday instructed Cabinet ministers to compile a third supplementary budget for fiscal 2020 to finance a fresh economic stimulus package to support the economy, which has been hit by the novel coronavirus pandemic.
The extra budget for the year through March will fund a likely extension of the government's Go To Travel subsidy campaign beyond late January to continue underpinning the tourism sector while stimulating consumption and steps to help businesses maintain employment, according to government sources.
Some lawmakers of the ruling Liberal Democratic Party and its junior coalition partner Komeito have said the upcoming budget will be in the region of ¥10 trillion to ¥15 trillion.
Suga told his Cabinet members to "ensure the economy continues to pick up and bring it back to a growth path led by private demand," according to the government.
In addition to countermeasures against the virus spread, Suga suggested the budget will include assistance for digital transformation and efforts to slash greenhouse gas emissions, as well as steps to promote migration from urban to rural areas.
The supplementary budget is also expected to provide funding to promote companies' investment in strengthening supply chains, improve the country's disaster preparedness and increase financial support for couples undergoing fertility treatment.
The government will compile the package as soon as possible, aiming to improve growth on both a macroeconomic and on a microeconomic level, economy minister Yasutoshi Nishimura said during a news conference after a regular Cabinet meeting.
"We'll want to consider government spending that will attract private investment," Nishimura said.
Japan's economy is expected to have rebounded in the third quarter after posting a record postwar contraction in the preceding three-month period, when a nationwide emergency over the coronavirus pandemic paralyzed economic activity.
But the recovery has been patchy, due partly to weak business and household spending, keeping Japanese policymakers under pressure to further boost fiscal and monetary support.
"Under the idea of a so-called 15-month budget, we'll compile the third extra budget and the fiscal 2021 initial budget as a unified one," Finance Minister Taro Aso told a news conference.
For the current fiscal year, parliament has already enacted two supplementary budgets totaling about ¥57 trillion for anti-virus stimulus measures under the administration of Suga's predecessor, Shinzo Abe, with issuance of nearly ¥46 trillion of deficit-covering bonds.
The draft extra budget is likely to be submitted to next year's ordinary Diet session convening in January, during which the initial budget for the next fiscal year from April is also set to be discussed. Part of the new measures in the stimulus package will be funded by the fiscal 2021 budget, according to the sources.
The government set aside a total of ¥11.5 trillion in reserve funds under the two extra budgets to fight the coronavirus pandemic. About ¥7.3 trillion remains and the money is expected to be reoriented to the new supplementary budget, the sources said.
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