• Kyodo, Bloomberg

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An economic policy panel of the government has proposed a fresh stimulus package to get the coronavirus-hit economy back in shape, including beefing up support for companies actively raising employee wages.

During a meeting on Monday, the panel also suggested a large-scale subsidy program to encourage the digitalization of rural areas, as well as assistance for building state-of-the-art semiconductor factories to ensure a sufficient supply of computer chips.

The proposals, aimed at realizing Prime Minister Fumio Kishida's signature vision of a "new capitalism," will be reflected in the government's economic package, which Kishida said will be compiled on Nov. 19.

During a meeting of ruling party executives on Tuesday, Kishida also said an extra budget to fund the spending will be crafted by the end of this month.

The economic package will amount to over ¥30 trillion in fiscal spending, according to sources close to the matter.

The government's tax reform package for fiscal 2022, which starts in April, will also include provisions related to the proposals.

Kishida, who became prime minister about a month ago and led the ruling Liberal Democratic Party to victory in a general election on Oct. 31, instructed the panel last month to come up with suggestions for the stimulus plan.

Kishida said at a meeting with the panel members that he will soon set up three subordinate committees to help hammer out policy details.

"Through discussions there, we will draw up a 'grand design' and measures to put it into practice in spring next year, and introduce them to the world," he said.

More stimulus was proposed at a government economic panel on Monday to revitalize the pandemic-hit economy, including increased support for companies who are actively raising employee wages.

During a meeting on Monday, the panel also suggested a large-scale subsidy program to encourage the digitalization of rural areas, as well as assistance for building state-of-the-art semiconductor factories to ensure a sufficient supply of computer chips.

The proposals, aimed at realizing Prime Minister Fumio Kishida's signature vision of a
More stimulus was proposed at a government economic panel on Monday to revitalize the pandemic-hit economy, including increased support for companies who are actively raising employee wages.

During a meeting on Monday, the panel also suggested a large-scale subsidy program to encourage the digitalization of rural areas, as well as assistance for building state-of-the-art semiconductor factories to ensure a sufficient supply of computer chips.

The proposals, aimed at realizing Prime Minister Fumio Kishida’s signature vision of a “new capitalism,” will be reflected in the government’s economic package, which Kishida said will be compiled on Nov. 19. | AFP-JIJI

To facilitate pay hikes, the panel said some subsidy programs should be contingent on businesses agreeing to raise their employees' wages.

It has been pointed out that under the current tax break incentive system, companies posting deficits and not paying taxes cannot receive the benefits even if they raise wages.

"Only after distributing (profits) to their employees in the form of wages would consumption expand," the panel said, adding that should there be a rise in consumption and growth in demand, "corporate profits would further increase, leading to (more economic) growth."

"Distribution strategy is a vital basis supporting growth," it also said.

As a specific step to promote the digitalization of local regions, the panel suggested legislation to set rules for better use of drones and robots to deliver food and commodities in rural areas with limited means of transportation.

In terms of ensuring Japan's economic security interests amid a global chip crunch, the proposals include preparing multiyear support and necessary systems for inviting factories of high-end semiconductors belonging to foreign firms such as those of Taiwan, which the panel says would "contribute significantly to national security."

The panel’s recommendations and the coming stimulus will indicate the direction of Kishida’s administration and show how aggressively he wants to spend to achieve those goals.

After another likely contraction of the economy over the summer, Kishida needs to deliver measures that can effectively shore up the recovery and support for his government ahead of further elections next summer.

While stimulus measures will need to support the recovery in the short-term, the panel made clear that support for startups is a key area where the prime minister believes the economy can be revitalized over the longer-term.

"The Japanese listing system is not one that is kind to entrepreneurs who are tackling new challenges,” said the report. "Some point out that the current system is set up so that the customers of security firms make money, rather than the startups themselves.”

Presenting a plan of establishing a ¥10 trillion fund for universities by March, the panel also highlighted the need to promote innovation by strengthening the science and technology field, saying it will be a "spark" for generating the virtuous cycle of growth and distribution advocated by Kishida.

Along with funds leftover from the fiscal 2020 budget and the issuance of new bonds, the economic policy package will be financed by a supplementary budget for fiscal 2021, which Kishida has said his administration aims to have parliament enact by the end of the year.

Part of the stimulus will also be covered by the initial budget for fiscal 2022, which is to be drawn up by late December, the sources said.

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