Japanese policymakers are considering new stimulus measures to tackle the economic fallout from COVID-19, aiming to further bolster markets after the central bank’s biggest cash injection since the global financial crisis.
The government would consider tax cuts and other measures to battle the damage from the outbreak, Japanese Minister of State for Economic and Fiscal Policy Yasutoshi Nishimura said yesterday.
With global stock markets reeling from the crisis, the Bank of Japan (BOJ) pumped US$30.272 billion into the financial system with an 84-day dollar funding operation, the largest since December 2008.
Photo: Reuters
A group of ruling party lawmakers proposed last week that the government temporarily eliminate Japan’s 10 percent sales tax and prepare a ￥30 trillion (US$281 billion) supplementary budget for spending.
Although extreme, the proposal highlights the seriousness of issues facing the world’s third-biggest economy.
Sales tax revenue is important to fund social welfare costs, but the government must take all available measures to support the economy, Nishimura said.
“We’ll look into a wide range of options on tax, fiscal policy and deregulation,” he told reporters after a cabinet meeting, when asked about the lawmakers’ proposal.
The government’s decision to implement a long-mooted increase in sales tax to 10 percent from 8 percent in October last year has been widely blamed for hurting the world’s third-biggest economy, which shrank 7.1 percent year-on-year in the final quarter of last year.
Many analysts are expecting another contraction this quarter amid the virus outbreak, which would mean two straight quarters of negative growth — the technical definition of a recession.
Nishimura’s remarks come after Japanese Prime Minister Shinzo Abe on Saturday said that the proposal to lower sales tax was among options worth considering to support the economy.
Policymakers across the globe are scrambling to deal with the fallout from the pandemic, which has sent global stocks into a tailspin.
Abe’s government is working on a huge fiscal spending package, acknowledging an agreement by G7 leaders to use all available policy tools to support growth.
“Business confidence is tanking to levels comparable to those during the Lehman crisis” in 2008, Nishimura said.
Japan’s Nikkei stock average has fallen 28 percent so far this year.
The benchmark yesterday traded either side of even following the BOJ’s cash injection, which exceeded the US$17 billion offered by the US Federal Reserve in its 84-day operation on Monday.
The BOJ’s move came after the world’s six major central banks took a joint step to provide more cash dollars on Sunday, as a rout in financial market over the past week led to a scramble by banks and companies for dollar liquidity.
Yet, even after the Fed’s emergency 100-basis-point rate cut over the weekend and the renewal of its quantitative easing program to increase cash in markets, there was little noticeable easing in the rush for dollar financing.
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