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Prime Minister Fumio Kishida formally acknowledged on Monday that the administration will permit municipalities to distribute ¥100,000 handouts fully in cash by the end of the year, reversing their original plan that would allocate only half in cash within this year and the other half in coupons next spring for eligible households with children up to 18 years old.

“I have been saying that we need to promote flexible system design while coordinating with local governments, and we have been considering various system designs in response to such various discussions,” Kishida said during the Lower House budget committee meeting.

“Then, at the discretion of the local governments and according to local conditions, I would like to add the implementation of the current measures in the form of a lump-sum payment of ¥100,000 in cash, together with the ¥50,000 payment from the end of this year as one of the options.”

Kishida’s remark is the culmination of a weekslong vacillation among central government officials that has frustrated local governments over how the handout should be allocated, raising questions over the payment’s structure as well as the ability of ruling party lawmakers and Kishida’s administration to cooperate and smooth out disagreements.

Under the original plan laid out as part of the government’s economic stimulus package, households where the top earner makes under ¥9.6 million and below would qualify for a handout worth ¥100,000 per child. The first installment of ¥50,000 in cash would be paid by the end of this year by tapping into a reserve fund for the pandemic response. Another ¥50,000 in coupons — funded through a supplementary budget that is under deliberation — would be distributed next spring when the new school year starts.

The administration initially made a strong case for coupons being part of the stimulus package because households tend to save the cash earned through a handout. Such savings would result in less consumption, which is needed to breathe life into the economy short term. However, some municipal leaders have been calling for the payments to be made entirely in cash, arguing that local government officials would shoulder the burden of issuing coupons.

Issuing coupons would be more costly for the central government as well. It has been revealed that administrative costs for handing out ¥50,000 each in cash would be some ¥30 billion ($264 million), but the necessary expenses for handing out the same amount in the form of coupons would triple administrative costs to ¥96.7 billion.

Prime Minister Fumio Kishida gestures during Monday's Lower House budget committee. | KYODO
Prime Minister Fumio Kishida gestures during Monday’s Lower House budget committee. | KYODO

Chief Cabinet Secretary Hirokazu Matsuno told reporters Monday that coupons will continue to be part of the subsidy program but the prime minister’s announcement is “to design a flexible system based on the requests of local governments to allow more flexible cash benefits.”

“While some local governments are positive about coupon-based benefits, such as wanting to make use of proposals such as regional gift certificates offered by local governments, others would like to see flexible cash benefits, including a lump-sum payment of ¥100,000, due to the practical difficulties of coupon-based benefits,” Matsuno said.

The handout, in general, tends to be popular among the public, but the one proposed by the administration this time around had a bumpy start. The LDP and Komeito were at odds over whether to impose an income cap to receive the benefit, with the former supporting it and the latter opposing it for the sake of expediency.

The two parties’ secretaries-general ultimately reached an agreement in November for enacting the ¥9.6 million limit. A Kyodo News survey, though, found only 19.3% of respondents were fully on board with the plan, with another 24% demanding across-the-board handouts and 19.8% responding there was no need for any handouts at all.

The Lower House budget committee in Tokyo on Monday. | KYODO
The Lower House budget committee in Tokyo on Monday. | KYODO

The central government’s explanation for the coupons has been unclear and incoherent. On Thursday last week, Deputy Chief Cabinet Secretary Seiji Kihara said the government would explain how coupons would be used after the supplementary budget is passed, which would be around Dec. 20, leaving only 10 days or so for the local governments to appropriate the first part of the handout.

As of Friday, government officials said local governments that could not begin the distribution of ¥50,000 in coupons by the end of June next year would be permitted to provide cash instead. Kishida, however, clarified Monday there would be no prerequisite for the local governments if they went with cash as opposed to coupons as long as the ¥100,000 payment is consistent with the central government’s policy, such as allocating the money for households with annual incomes of ¥9.6 million and below. The central government would provide subsidies after the supplementary budget is passed if municipalities distribute the ¥50,000 handout in cash that would have been earmarked for coupons before the budget is passed.

The latest stumble is quickly becoming a headache for Kishida as a cash handout was already a thorny subject for the prime minister. Last year when he was an LDP policy council research chair — essentially the chief executive of the ruling party’s policymaking — Komeito overthrew the LDP’s ¥300,000 per-qualified-household plan he was responsible for crafting.

In the end, the LDP acquiesced to Komeito’s demand for ¥100,000 per person without income restrictions, which meant that the supplementary budget proposal then-Prime Minister Shinzo Abe’s Cabinet had just approved a week earlier had to be reworked, and Abe issued an apology during a televised news conference.

Opposition party lawmakers went after Kishida for his handling of the handout. Junya Ogawa, the Constitutional Democratic Party of Japan policy research council chair, rebuked Kishida’s announcement, saying it came too late.

The prime minister fought back by arguing that his decision was “the result of listening carefully to the discussions and various voices in order to design a better system.”

“I understand that there are various inconveniences, but I would like to continue to design the system from the perspective of how to make it better in order to protect the lives and livelihoods of the people, while maintaining good communication with local governments.”

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