Japan’s ruling party yesterday proposed the nation’s biggest-ever stimulus package of ￥60 trillion (US$554 billion) as the COVID-19 pandemic locks the economy in a recession.
The sum includes ￥20 trillion in fiscal measures with private initiatives and other elements likely making up the rest, the proposal by the Liberal Democratic Party showed.
More than ￥10 trillion, or the equivalent of a 5 percentage point cut in the sales tax rate, would be handed out to the public in a combination of cash, subsidies and coupons, the plan showed.
The proposal puts an initial figure on a stimulus package that Japanese Prime Minister Shinzo Abe promised on Saturday would be bigger than the economic support offered in the wake of the 2008 global financial crisis.
The plan did not include details on how the package would be funded, although the scale of fiscal measures suggests a sharp increase in the budget deficit is likely.
The main takeaway from the plan is the Abe administration’s signaling of its strong commitment to support the economy, economists said.
“There’s a lot of debate about how big the package needs to be, but right now there’s no point in debating size,” Itochu Research Institute chief economist Atsushi Takeda said.
“The government is saying: ‘Yes, we’re worried about sorting out the nation’s finances, but right now we’ll do whatever needs to be done.’ And there’s no opposition party in Japan that’s going to disagree with that,” Takeda said.
The plan leaves the door open to more stimulus down the line, flagging the need to consider more measures if needed.
Past experience shows that one package is unlikely to be enough, with as many as five sets of measures unleashed between August 2008 and December 2009 as Japan battled the fallout of the world financial crisis.
“Quite a few in the party hold the view that this still isn’t enough,” said Fumio Kishida, the party’s policy chief, who submitted the proposal to Abe. “I asked the prime minister to take leadership on this matter and put together an even bigger number for our policy response.”
Japanese Minister of Finance Taro Aso has already called for a two-stage response to the impact of the pandemic.
Kishida on Monday said that a series of packages could eventually amount to ￥100 trillion.
The latest package would be equivalent to more than 10 percent of the nation’s GDP and calls for corporate funding measures of more than ￥40 trillion, the plan says.
It also says the party tax panel would consider tax payment deferrals and cuts.
The plan said cash handouts would be made periodically for households and individuals whose incomes have been greatly hit by the virus.
It also calls for increased subsidies to companies that do not cut jobs.
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