JAKARTA (TheInsiderStories) – As the number of new COVID-19 cases has accelerated rapidly over the past 10 days in Japan, Prime Minister Shinzo Abe declared a state emergency in Tokyo and six prefectures from April 7 until May 6. The seven cities’ economic activity comprises nearly 50 percent of total Japan’ gross domestic product (GDP).
In order to counter the difficulties, the premier announced a largest-ever emergency stimulus package totaling JPY108 trillion (US$363.90 billion) or about 20 percent of GDP, which includes JPY39.6 trillion in fiscal spending and JPY19.8 trillion worth measures of which were not exercised under the previous economic package announced in December 2019.
“To prevent the spread of infections, we will fundamentally strengthen counter-cluster measures by doubling the PCR screening capacity to 20,000 per day and reinforcing the structures of public health centers,” said Abe in an official statement.
Furthermore, his administration will urgently set up medical treatment structures focused on providing medical care for patients with severe symptoms, in preparation for the sudden surge of patients. With regard to securing hospital beds, a matter of the utmost importance, the government will increase the number of beds from 28,000 to 50,000.
As for ventilators needed to treat patients with severe symptoms, Japanese government will secure 15,000 and continue to increase production further. The world third largest economy will also accelerate the research and development of therapeutic medication and vaccines.
At the same time, the country plans to increase the production of Avigan, make all necessary preparations to increase the domestic stockpile from current 700,000 doses to 2 million doses. For the real interest-free unsecured loans provided by the financial corporations, Japan will extend credit lines and improving loan conditions by allowing recurring debts to be refinanced as interest free loans.
Furthermore, his government will also make it foreign companies possible to receive loans with the same conditions from local financial institutions, such as local banks, Shinkin banks, and credit cooperatives. He asserted, “We will strongly assist business continuity with unprecedentedly strong liquidity support.”
Moreover, for the first time in Japan’ history, the government will introduce a system to boldly defer the payments of national taxes and social security premiums, allowing the deferral of JPY26 trillion of such payments, without collateral and penalties.
In addition to these measures, he decided to provide bold payment of JPY300,000 each, primarily for households in need, whose revenues have declined because of the significant impact of the novel coronavirus. He will also provide unprecedented cash payments of JPY2 million each to micro, small, and medium-sized business operators and JPY1 million each to individual business owners, who are facing extremely difficult circumstances.
“In total, we will provide over 6 trillion yen in cash payments to strongly support business continuity and daily lives,” adds by the premier.
Additionally, these measures include bold and unprecedented demand stimulation measures, looking ahead to the phase after the containment of outbreaks. In particular, we will provide bold support in the form of discounts and vouchers, to tourism, transport, food services, and event businesses, which have suffered significant declines, in a short period of time.
He concluded, “The scale of the emergency economic measures, include these assistance, will be a scale of 108 trillion yen, the largest amount ever. The scale equivalent of 20 percent of GDP is truly bold, even compared with other countries.”
Commenting on the policies, IHS Markit rated, the large stimulus packages are unlikely to be fully utilized and could have eroding effectiveness, while households usually do not spend all cash benefits in order to save for further difficulties.
This means the stimulus is unlikely to offset downside from stricter restriction measures to contain COVID-19 and a decline in external demand, and it will probably not drive the V-shaped recovery the government anticipates.
Moreover, prolonged difficult business conditions could lead to an increase in bankruptcies, which make it unable to pay back loans from public financial intuitions and, in turn, raise public debt. IHS Markit has factored the negative impact from the emergency measures could be 0.9 percentage point of real GDP in 2020.
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