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A key ruling party lawmaker said an extra budget being drafted now may not be the end of Japan’s stimulus spending this fiscal year given the uncertainty surrounding the spread of the coronavirus.

“There are a lot of possibilities,” said Keisuke Suzuki, who heads the Liberal Democratic Party’s fiscal and financial policy unit, in an interview. A third extra budget is being pulled together now, “but a fourth extra budget isn’t out of the question if the situation changes.”

The openness to more spending, even before the latest stimulus package is finalized, underscores the concern among policy makers that rising waves of the virus could derail the recovery. Tokyo and Osaka last week called on some businesses to close early, while the northern prefecture of Hokkaido asked restaurants to shut altogether to stem the virus’s spread, measures that could slow the economy’s rebound.

Keisuke Suzuki | KYODO
Keisuke Suzuki | KYODO

“We don’t know how far the jobless rate will rise, how much bad debt will pile up, or how this will impact financial institutions,” Suzuki said.

Japan already has the developed world’s heaviest public debt burden, but calls for more spending are increasing as the virus spreads.

Earlier this week, a new economic adviser to Prime Minister Yoshihide Suga said that Japan will need ¥40 trillion ($384 billion) in fresh spending in its third extra budget to stop a surge in unemployment. Suzuki declined to say how large the package would be, but bond traders are expecting it to total ¥10 trillion to ¥15 trillion.

Separately, Suzuki said the Suga administration is looking to offer tax breaks to foreign workers in the banking industry as part of a renewed push to compete as an international finance hub. Changes to inheritance and capital gains taxes are among concessions being considered, he said.

“We haven’t come to a conclusion, but we want to be aggressive in pushing policies related to the international financial hub, including tax reforms,” he said, reiterating the government’s argument that Japan has a chance to lure business away from Hong Kong amid China’s recent crackdown.

“This year is an opportunity,” he said. “We’d like to send a different kind of message than before.”

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