Japan Cabinet OKs reworked extra budget for $1.1 tril. virus package

21, Apr. 2020

TOKYO, Kyodo - Japan's Cabinet on Monday approved a reworked fiscal 2020 supplementary budget to finance universal cash handouts, expanding the size of a record economic package plan to 117.1 trillion yen ($1.1 trillion) aimed at cushioning the fallout from the coronavirus pandemic.

In a rare move, the extra budget was reworked and boosted to 25.69 trillion yen from the previously planned 16.8 trillion yen due to a sudden policy shift by the coalition government to provide a cash handout of 100,000 yen per person, including foreign residents.

The record spending plan, now expanded from the initial 108.2 trillion yen, includes loan programs and deferred tax payments, and the sum of fiscal spending is 48.4 trillion yen.

Shibuya Crossing, Tokyo (Photo by Charles Deluvio on Unsplash)
Shibuya Crossing, Tokyo (Photo by Charles Deluvio on Unsplash)

The government originally planned to give 300,000 yen to each household whose income had fallen sharply due to the virus outbreak.

Including about 4 trillion yen to cover the 300,000 yen handouts, the initial extra budget would have been submitted to parliament on Monday.

Prime Minister Shinzo Abe told a press conference Friday he will replace the original plan with the across-the-board 100,000 yen handouts, after coming under pressure from Komeito, the coalition partner of his ruling Liberal Democratic Party.

The new plan to deliver cash to some 126 million people in Japan requires an additional 8.88 trillion yen, prompting the government to issue deficit-covering bonds worth 23 trillion yen to finance the measure, among other policies included in the extra budget.

"My understanding is that the decision (on the universal cash handouts) was made from the viewpoint that unity among all people in Japan matters more than anything to win this battle against the virus," Finance Minister Taro Aso told a press conference after the Cabinet approval of the supplementary budget.

The extra budget is expected to be submitted to parliament around April 27, with its enactment likely on May 1, one week later than the government originally scheduled.

The cash handouts should begin by the end of May, and people will need to apply for the money via mail or online, officials said.

Among other policies in the emergency package are subsidies of up to 2 million yen for sole proprietors, including freelancers, and medium-sized companies whose revenues have dropped significantly due to the virus epidemic.

The government will also extend special subsidies worth 1 trillion yen to local governments so they can financially aid companies that comply with local authorities' requests to suspend operations under the nationwide state of emergency through May 6.

About 13.9 billion yen will be spent to triple the national stockpile of the anti-influenza drug Avigan, to ensure there is enough to treat 2 million people.

The drug, developed by a group firm of Fujifilm Holdings Corp., is being tested as a treatment for the respiratory disease caused by the new coronavirus, after studies in China suggested it is effective in treating COVID-19 patients.

The latest stimulus far exceeds the 56.8 trillion yen emergency package compiled in April 2009 to counter the effects of the global financial crisis that started the previous year. It follows the 26 trillion yen stimulus approved last December to soften the impact of the sales tax rate hike from 8 percent to 10 percent last October. (Kyodo)