Japan eyes new $1.1tn stimulus to ease coronavirus impact on economy

The proposed package will be on top of the economic measures worth $1.1tn rolled out last month

Passengers wearing protective face masks at a subway station in Tokyo. Japan is looking to roll out at a fresh $1.1tn stimulus to boost its economy. Reuters.  

Japan will compile a fresh stimulus package worth $1.1 trillion (Dh4tn) that will include a sizable amount of direct spending to cushion the economic blow from the coronavirus pandemic, according to a draft of the budget obtained by Reuters on Wednesday.

The stimulus, which will be funded partly by a second extra budget, will be on top of a $1.1tn package already rolled out last month, putting the total amount Japan spends to combat the virus fallout at ¥234tn (Dh8tn) – roughly 40 per cent of Japan’s gross domestic product.

The government’s $1.1tn new stimulus, to be compiled on Wednesday, will include ¥33tn in direct spending, the draft showed.

To fund the costs, Japan will issue an additional ¥31.9tn in government bonds under the second supplementary budget for the current fiscal year ending in March 2021, according to the draft.

“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 in a meeting with ruling party lawmakers on Wednesday.

Government officials have said the new package will include steps such as an increased medical spending, aid to firms struggling to pay rent, support for students who lost part-time jobs and more subsidies to companies hit by slumping sales.

In the second extra budget, the government will also set aside ¥10tn in reserves that can be tapped for emergency spending, the draft showed.

In the meeting with ruling party lawmakers, Mr Abe said the government will separately provide up to ¥140tn in financial assistance to firms hit by the pandemic.

Japan compiled a record ¥117tn stimulus package in April that centred on cash payouts to households and steps to cope with the immediate damage from the pandemic.

Given the widening fallout from the virus, Mr Abe on Wednesday ordered his cabinet to compile another stimulus plan funded by a second extra budget for the current fiscal year.

Japan’s economy slipped into recession for the first time in four-and-a-half years in the last quarter, putting the nation on course for its deepest post-war slump as the virus hurts businesses.