Japan eyes second extra budget to help economy

TOKYO • Japan will take additional stimulus measures “swiftly” to combat the fallout from the coronavirus pandemic, Prime Minister Shinzo Abe said, signalling readiness to compile a second supplementary budget during the current parliamentary session running till next month.

The new package of steps would aim to cushion the blow to the world’s third largest economy, which is on the cusp of deep recession amid a plunge in global demand and a local state of emergency that has been extended till the end of the month.

Mr Abe said the government will consider additional steps like aid to firms struggling to pay rent, support for students who have lost part-time jobs, and more subsidies to companies hit by slumping sales.

“If we decide that additional steps are needed, we will take bold and timely action,” Mr Abe told Parliament yesterday, when asked by an opposition lawmaker if the government will compile a second extra budget to fund the additional steps.

“It’s important to act with speed,” he said, adding that the government was ready to compile the second extra budget in time to pass it through the current Diet session ending on June 17.

Mr Abe declined to say what the size of spending could be, saying the decision will depend on how many prefectures will be able to lift state-of-emergency measures now applied nationwide.

In extending the measures to the end of May, the government said it would reassess the situation on Thursday and possibly lift them earlier for some prefectures.

“We will do our utmost to help companies sustain their businesses and protect jobs,” Mr Abe said, adding that the government will “act swiftly”, taking into account proposals made by ruling and opposition lawmakers.

Japan compiled a record US$1.1 trillion (S$1.56 trillion) economic stimulus package last month that focused on cash payouts to households and loans to small businesses hurt by the pandemic.

Ruling coalition lawmakers have ramped up calls for more assistance, as the government’s decision to extend the state of emergency heightens risks of more bankruptcies and job losses.

In a sign of the rising demands from politicians, opposition lawmaker Yuichiro Tamaki urged Mr Abe to deploy fresh spending of 100 trillion yen (S$1.32 trillion) funded by a 100-year “coronavirus” bond.

But many analysts expect any extra spending to be fairly small, given Japan’s already huge public debt that is twice the size of its economy.

SMBC Nikko Securities’ chief bond strategist Chotaro Morita expects the size of direct spending funded by a second extra budget to be worth 3 trillion to 4 trillion yen.

Mr Katsutoshi Inadome, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities, said: “The size of a second extra budget will be smaller than the first one. Even so, additional bond issuance is unavoidable.”

Japan’s economy likely shrank for a second consecutive quarter in the first three months of this year, a Reuters poll showed, meeting the definition of a recession as the pandemic crushed consumption and business activity.


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