Japan plans to launch a stimulus package worth $1.1 trillion. A huge part of the amount will be used to cushion the economic impact of the coronavirus crisis, according to a draft of the budget obtained by Reuters.
Japan will have the stimulus package funded partially by a second extra budget. This is in addition to a $1.1 trillion package already released last month. With this, the total amount Japan spends to manage the effect of the coronavirus pandemic is at 234 trillion yen, which is about 40% of Japan’s gross domestic product.
The 117 trillion yen fresh stimulus package from the government will be compiled on Wednesday. The draft shows that the fund will include 33 trillion yen in direct spending.
Moreover, to ensure the funding for the costs, Japan will release an additional 31.9 trillion yen in government bonds through the second supplementary budget for the current fiscal year ending in March 2021.
“We must protect business and employment by any means in the face of the tough road ahead. We must also take all necessary measures to prepare for another wave of epidemic,” Prime Minister Shinzo Abe said during a meeting with ruling party lawmakers.
Government officials pointed out that the new package will involve measures such as an increased medical spending, assistance to firms that are not able to pay rent, support for students without part-time jobs, and more subsidies to companies suffering from low or lack of sales.
Based on the draft, the government will also allocate 10 trillion yen for reserves that can go to emergency spending.
In the same meeting, Abe explained that the government will separately release up to 140 trillion yen in financial aid to companies in Japan that are struggling due to the coronavirus pandemic.
In April, Japan compiled a record 117 trillion yen stimulus package. This was allocated for cash payouts to households and programs to address the immediate damage from the pandemic.
Due to the worsening effect of the coronavirus outbreak, Abe told his cabinet to compile on Wednesday another stimulus plan supported by a second extra budget for the current fiscal year.
The economy of Japan has fallen into recession for the first time since 2015 due to impact of the continued escalation of the coronavirus pandemic.
Japan, the world’s third biggest economy, shrank at an annual rate of 3.4% in the first three months of 2020, as the coronavirus pandemic continues to spread. Globally, the economic impact of the pandemic is at approximately $8.8 trillion.
The country posted a 3.4% decline in its gross domestic product (GDP) during the quarter, which was preceded by a 6.4% fall during the last quarter of 2019, pushing its economy into a technical recession.
This was despite Japan not going into full national lockdown and opted to issue a state of emergency in April. severely affecting supply chains and businesses, which were heavily dependent on trade.
Aside from the impact of the coronavirus, Japanese consumers were also affected by the sales tax increase implemented in October, raising it from 8% to 10%.
According to analysts surveyed by Reuters, they expect the country’s economy to contract by 22% during the current quarter. This would represent Japan’s biggest decline on record.