Japanese Prime Minister Shinzo Abe is doubling down on his stimulus measures with more than US$1 trillion of extra help to keep businesses and households afloat amid the COVID-19 recession, a document obtained by Bloomberg showed yesterday.
The ￥117 trillion (US$1.1 trillion) package includes financing help for struggling companies, subsidies to help firms pay rent, and several trillion yen for healthcare assistance and support for local economies, the document showed.
The spending is to be funded by a second supplementary budget of ￥31.9 trillion that breaks a record for extra budgeted spending set only last month, the document showed.
The latest aid was finalized after data last week confirmed Japan has sunk into a deep recession and polls show support for Abe’s Cabinet dropping to a record low over its handling of the outbreak.
While the government ended its nationwide state of emergency this week and new virus cases have tailed off, the economic outlook is still grim.
Analysts expect GDP to shrink by more than 20 percent this quarter and say the recovery could be slow, as exports, tourism and business investment struggle to rebound.
Abe on Monday had said Japan would weather the pandemic by mounting the world’s biggest stimulus response, promising new measures that would bring the government’s support for the economy to about 40 percent of GDP.
The document showed the new measures match the overall size of last month’s ￥117 trillion package, bringing the total to just under ￥234 trillion.
“These measures are designed to stop or alleviate the damage done by the pandemic on companies and individuals, not to boost growth. So even with this package, Japan’s pickup will be very gradual,” BNP Paribas SA economist Hiroshi Shiraishi said.
The government’s extra spending comes amid reassurances from the Bank of Japan (BOJ) it would not allow bond yields to rise.
In a rare joint statement last week, the government and the central bank pledged tight cooperation to get funds to struggling businesses and shield the economy from the virus’s fallout.
BOJ Governor Haruhiko Kuroda on Tuesday told parliament that the bank would buy more government debt if the yield curve needed to be lowered.
Japan would boost its debt issuance by ￥55 trillion to ￥60 trillion to fund the second extra budget and other loans and investment in the new stimulus package, a person familiar with the matter said.
That would bring the total bond issuance this fiscal year to more than ￥200 trillion, another bump from the ￥128.8 trillion planned in December last year.
Parliament is expected to pass the new spending before its current session is scheduled to end on June 17.
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